If there is one thing in financial services Simon Culhane just cannot fathom it is the idiosyncrasies of the regulatory system. The chief executive of the Chartered Institute for Securities & Investment, now encompassing the Institute of Financial Planning, is baffled at the over-regulation of financial services relative to other industries. Take gambling, for example.
He says: “We did a survey as part of some research and found 50 per cent of young people gamble on mobile phones.
“They had no concept of odds and risk, and we were amazed at how easy it is it for them to have access. There is no financial advice warning if you want to put £100 on a horse or Arsenal scoring a goal. But if you want to put £100 in a unit trust there’s so much paperwork. Regulation is way over the top. If you think of financial consumer protection and gambling, it’s like we’re living in a parallel universe.”
Culhane is a goldmine for examples of regulatory inconsistencies. He says a lot of his time is spent in financial planning seminars where chief executives lament how expensive it is to complete the regulatory and suitability requirements.
He says: “They are becoming frustrated at having to move upscale – not to maximise profits but because there is a minimum they need to manage heavy service overheads. Why does it take 20 hours to ‘onboard’ a new client? That is ridiculous; someone has to be paid for those 20 hours before you pay someone to give advice.
“The Financial Advice Market Review hinted at a slightly different regime for robo-advice. So what are we saying? Are we saying we will give less protection to more vulnerable people who have fewer assets?”
It all looks very different to when Culhane learnt his craft in the 1980s banking sector. He started as a graduate trainee with Lloyds after realising he was not cut out to be a doctor.
“Banking was a valued profession in the early 1980s; it was something to be proud of. I gave financial advice before you needed to have qualifications. I remember advising customers on cash, debt, investments, budget plans. It was common sense.”
As a bank manager, Culhane helped real people with real problems.
“In many ways, banks were good financial planners and advisers but that’s all gone. Now the best financial planning you can get is from a professional financial planner.”
“Are we saying we will give less protection to more vulnerable people who have fewer assets?”
As if anticipating accusations of looking back with rose-tinted glasses, Culhane accepts there were rogues in the industry and the RDR was designed to weed out poor advice. But he is concerned in the wake of all the misselling scandals the consumer protection pendulum has swung too far and the baby may have been thrown out with the bathwater, creating an advice gap.
He says: “Financial planners are expected to go through regulatory hoops to take on customers, so it’s not viable to take on those with less than £150,000 at the lowest estimate, but more like £250,000.
“Robo-advice is a good idea as it will accommodate a lot of people but we need emotion and the personal touch as well as a clinical computer. It’s only half the story.”
More than 18 years of Culhane’s life has been spent in banking, including a spell with Lloyds in Chicago. “It’s an easy place to settle; nothing like the aggressiveness of New York.”
But banking is only part of the story. Culhane has worked in other fields over the years such as healthcare and national government. As deputy director of the Prime Minister’s Efficiency Unit between 1995 and 1998, he witnessed the final years of John Major’s government and the start of the Tony Blair era. The leaders were so different, yet behind the scenes nothing really changed, he says.
“The reality is that good government works continuously and there was not a lot of difference between the end of the Major government and the early Blair years. Evidence of that is that many of the initiatives we were working on paused for the election then came through with the new Labour government.”
The same cannot be said of Culhane’s arrival at the CISI. “The CISI is a different organisation now to the one I joined 12 years ago. Then it was UK-focused, had 30 qualifications, a few books and 60 staff. Today it’s an international body with 40 per cent of exams taken outside the UK, 87 qualifications – some of which are offered in Spanish or Arabic – and 175 staff.
“When I arrived here we were in the middle of recession and it was losing a lot of money. The training arm was in danger of bringing down the institution, so we closed it.”
For Culhane, the biggest challenge was working out what was needed to ensure the CISI could continue. Culhane recommended a restructure and a global focus. He now plans to grow membership from around 24,000 to 30,000 over the next few years by offering a wide range of qualifications.
Following its merger with the IFP, some in the industry question the CISI’s ability to cater for financial planners. But Culhane believes it can meet all members’ needs under one roof because it is an education body, not a lobbying body.
“There are no conflicts. It is absolutely right to provide qualifications for financial planning, compliance and risk, wealth management – they are compatible,” he says.
What’s the best advice you’ve received in your career?
People matter. Be nice to people on the way up as you might need them on the way down.
What has had the most significant impact on financial advice in the past year?
The ongoing impact of regulation.
What keeps you awake at night?
Thinking how to keep in order all the opportunities and initiatives we have got going on.
If I was in charge of the FCA for a day, I would…
Review and reduce the paperwork for ‘onboarding’ suitability requirements.
Any advice for new advisers?
Remember what it is to be professional – make sure you keep your knowledge up to date and that you treat people with integrity and respect.
2004-present: Chief executive, Chartered Institute for Securities & Investment
2003- 2004: Foundation Trust project director, University College London Hospitals NHS Foundation Trust
1998-2002: Director, Deutsche Bank
1995-1998: Deputy director, Prime Minister’s Efficiency Unit
1981-1995: Senior manager, Lloyds TSB