In 1980, the typical adviser’s career path started with them joining an insurance company, before moving to an adviser firm.
Later, the more enterprising individuals might go it alone. This resulted in thousands of small firms. Their ethics and the quality of advice they offered were utterly diverse. Some were well-known and highly respected in the local financial services community; others were equally well-known as sharks and incompetents. But that did not stop insurers granting them agencies.
Regulation took a long time to bite and, for all too long, qualifications were optional.
While out walking my dogs a while back I met some old family friends I had not seen for years. These were ordinary working people who had always had it tough, doing their best on small incomes.
It sickened me to learn their finances had been ruined in the late 1980s by a so-called adviser despised throughout the Leeds financial services community as a greedy halfwit.
That had not stopped a national – and supposedly reputable – independent firm from employing him, however.
DBS checks convinced me that the network independent model is non-viable for precisely the same reasons as the large supposed independent. If the network is really doing all the compliance needed to guarantee the quality of advice, it cannot be economic.
The future of independence lies with small owner-managed firms where the owners have complete oversight and responsibility. The adviser who knows he himself must pay the price for any missale will always be more careful than the one who expects somebody else to pick up the tab.
This belief has shaped my own firm. Just before I set up, a former colleague wanted me to work “on his team”. He was an appointed representative of a cheap local mini-network. I did my due diligence and concluded it was not sound. Instead, I went it alone, founding West Riding directly authorised.
The network’s apparent cheapness was soon explained by its non-existent compliance, and the FSA later closed it down.
The same ex-colleague then asked to be our appointed representative. I declined, but later did take him on as a self-employed adviser. That was a mistake, as he pursued his self-interest to our significant detriment.
I shall never again have self-employed advisers in my firm. I want employed people who have a stake in the firm and understand that their personal success depends on our collective success through the consistent delivery of excellence. I want “we-thinkers”, not “me-thinkers”.
Some advisers will surely be more profitable by going restricted. For me, it is not about the money. For me, independence goes a lot further than the regulator’s definition. Done right, independence is self-regulating. It also means nobody owns me.
I even use an independent compliance consultant because the large service providers – like the networks that spawned them – all seek to erode their members’ independence by putting temptation in one’s way. I am never tempted but the tempting does get boring. Freedom is not free. It is priceless.
Neil Liversidge is managing director of West Riding Personal Financial Solutions