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Nic Cicutti: Advisers wouldn’t have changed without the FCA

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One of the things I find about Money Marketing is no matter how assiduously you read it, little gems slip through the net. It is only a week or two later, perhaps when you are directed there by someone else, that you get a change to study them properly.

So I am grateful to Informed Choice executive director Nick Bamford for indirectly alerting me to one such article via his own column last week. Nick referred to an article in Money Marketing where FCA Consumer Panel chair Sue Lewis was quoted as saying that “not much has changed” in the field of financial services.

Her comments came in a series of articles for Apfa to mark that organisation’s 15th anniversary. Lewis said: “Successive FCA reviews of RDR implementation have found problems, such as the use of ‘in kind’ inducements to advisers to sell particular products, and failure to disclose costs fully.

“How can firms expect to be trusted when they demonstrate repeatedly that they are not trustworthy?

“It seems fair to say that not much has changed in the past decade or so across the industry, although we have not yet seen the full impact of a dedicated conduct regulator.”

For Nick, this kind of stuff smacks of “adviserism”, a word he uses to describe a view of the world where all advisers are lumped together and are all classed as bad.

He says: “Suggesting that the final services industry is some kind of homogenous group of people sounds to me like some kind of ‘ism’ (just like suggesting all men or women behave the same = sexism, or all people of a particular race behave in the same way = racism).”

Nick counterposes his own view, which appears to consist of IFAs going about their work quietly but effectively, helping clients resolve their financial conundrums in such a way as to engender in them that most elusive of qualities: trust.

“Just about every IFA firm and individual that I know has a client base made up of people who absolutely trust the advice and service that they receive from their adviser,” Nick says.

Contrary to Lewis’ view, Nick adds things have changed significantly: advisers have worked hard to obtain higher qualifications, improved the quality of their advice to the point where unsuitable products are “avoided like the plague”.

Advisers have “successfully engineered a move away from commission-based sales to transparent adviser charging even though a large number saw such a move as less than positive.”

Nick’s positive view of most fellow-IFAs is unsurprising. And there is some truth in it: contrary to what Lewis says, the IFA landscape has changed significantly in the 20-plus years I have been writing about it.

Perhaps also unsurprisingly, however, Nick adds none of the positive transformation he refers to appears to have had anything to do with regulation of the industry: “If trust has been destroyed then the blame lies primarily with a 28-year old broken regulatory regime that has patently failed to serve the consumer well.”

Nick appears to believe without regulatory intervention over the past two decades all the changes he mentions would have happened by themselves, with the industry benignly delivering more product clarity and less opaque – and costly – charging structures.

Meanwhile, advisers all over the country would all have got out of bed one morning and, while grooming themselves for the day, collectively concluded that their far-less-than-O-level qualification standards were not acceptable.

On their way to the office, the overwhelming majority would also have decided they no longer preferred the use of commission as a form of remuneration and fees for advice given was a much better alternative.

Somehow, I find that hard to believe. As Nick knows only too well, having read Money Marketing for longer than I have been writing in it – but only just – every initiative that aims at empowering consumers, most of which he approves, has had to be imposed on the industry.

While it is true many advisers like himself have been at the forefront of introducing measures that highlighted the value and good standing of professional IFAs, others in the industry have let Nick and his colleagues down.

So while it may be incorrect to say “not much has changed” in the industry, Lewis is right to suggest that one dominant tendency within the industry has always been try and circumvent rules to mitigate their impact. 

Ironically, Sue and Nick’s views are closer than they imagine in one sense: she says notwithstanding the RDR, “less than a third of people who had not taken advice were aware of the new emphasis on professionalism and transparency.” Nick argues “there are more variations of advisers than you can safely shake a stick at.” The issue then is not so much over the RDR itself but how any positive changes have been communicated to the public.

The underlying question of “trust” then becomes enmeshed within a complex ecosystem, where “good” IFAs are tiny microorganism within a wider and still-tainted industry pool. For trust to flourish it needs the entire pool to be drained and cleared.

Simply pointing to the cleaner parts of it only shows up how dirty the rest of the industry still is.

Nic Cicutti can be contacted at nic@inspiredmoney.co.uk

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Comments

There are 20 comments at the moment, we would love to hear your opinion too.

  1. All Journalists hack phones. All MPs fiddle their expenses. All Celebrities have a “chequered past” All Accountants and Solicitors overcharge their clients. All Drs fail to spot fatal diseases that can be treated in their patients.

    The problem is that if we focus on the few for whom the above statements are true, trust in the others will never be restored.

    I am fortunate to live in a nicer world than the one inhabited by Nic 🙂

  2. Nick is correct – the world we live in is enlightened by our clients who are friends. We share in their joy and sadness, we console and counsel them. We are in a very privileged position and do our hardest to help and support them. Deaths, house purchases, sickness, birth, unemployment, divorce. We are always there. So when people slate the adviser community you feel like slapping them!
    Regulation may have helped and improved things in part (though I struggle to see how it has helped our clients) but the reality is that it has also meant that it is a damned sight harder to do business ethically and given my recent experiences a lot easier not to transact that business in an underhand manner. Bureaucracy and differing interpretation of rules frustrates and confuses the clients often inconveniencing them and advisers become resentful and bitter. That is where there is much danger for the broader adviser community – disenfranchised “advisers” taking short cuts.

  3. Nic points out -: “The underlying question of “trust” then becomes enmeshed within a complex ecosystem, where “good” IFAs are tiny microorganism within a wider and still-tainted industry pool. For trust to flourish it needs the entire pool to be drained and cleared.
    Simply pointing to the cleaner parts of it only shows up how dirty the rest of the industry still is”.

    So Nic what do you propose ? it sounds like the only option for our regulators is to sack/de-licence every-one and re-appoint those who only fit the mould or their ideal ?

    Ahh ! true fascism !!

    As, like god our regulator is infallible (as the propergandaer would lead us to believe) so all is good with the world !

  4. I reads this first thing this morning and thought, leave it, just leave it… It’s another piece of selective (yes Nic, you too and you know it!) lazy journalism aimed at getting the community’s back’s up and earning clicks.

    However, I needed to get this off my chest!

  5. Thanks Nic, beat us all with the same stick mate, we are all guilty as sin. Ar**ole.

  6. Perhaps there’s another point here. There are two distinct types of ‘trust’ being lumped together and whilst they are connected they are very different.

    Firstly, there is the trust in an individual adviser. Clients trust their adviser or they wouldn’t use them. Whether the adviser is trustworthy in practice is another matter. Perpetrators of the worst excesses (and I include negligence, ignorance and outright fraud) are often the most charming and outwardly trustworthy people you will meet – I’ve dealt with a fair few. On the other hand I’ve known some brilliant advisers who would stop at nothing to do the right thing but don’t ‘connect’ with clients. I doubt this has changed at all over the years and probably never will.

    Secondly, there is trust in the various sectors, whether that be advisers, banks, fund companies, the financial services industry generally, etc. This is largely a perception issue. Recent comments from the likes of Ms Rookes can have a disproportionate impact in this respect that can knock on to individual advisers (by reducing the pool of clients willing to engage) regardless of whether they are trustworthy or not. Regulation and statements from regulators are included in this too. RDR probably has an overall positive effect on this, other actions and statements from senior staff of the regulator maybe less so.

    Nic, I may not agree with some of what you say but I respect you and also generally trust your judgement in terms of what you write. Same with regards to a friend of mine who is also a journalist. However, I think journalists as a whole are a bunch of unethical shysters who wouldn’t let truth or justice get in the way of a good story that pays well…

  7. I suspect reality is somewhere inbetween; for every adviser clinging onto commission and scraping past their exams in the run up to RDR, there are others who have operated fee based models and have been Chartered for years.

    As Nick B suggests, it’s dangerous to tar everyone with the same brush.

    Whilst the FSA drove through the change (and let’s be fair there are still dissenters pointing at how everything was better pre-RDR) there were plenty of firms operating on this client focussed model well before they had to.

  8. As ever there are shades of grey (50??). On an overall basis I would agree with Nic. Many advisers have been dragged screaming to a higher plane. We know who they are and who represents them – both now and in the past – as it has been well reported in these pages and some have even contributed.

    However there are a significant number – Nick and his firm are a good example – who not only have changed – they have led and incepted change and procedures before the regulator ever dreamt of them. Indeed in many ways offer a better propostion than the regulations envisage.
    Nick is also correct in saying that not all regulation has been in the consumers’ best interest. The regulator has fudged a great deal. Huge amounts of commission are still paid – Equity Release being a prime example. One my wonder how many advisers would sing its praises if they charged a fee for this work.

    If fee charging is the right way to go (including CAR) then why not for everything?

    The huge amount of redundant paper and the concentration on box ticking has raised costs to no consumer advantage. There seems an inability or difficulty by the regulator to distinguish between the control needed for (say) a bank and that for a small IFA. Too much reliance is place on the big for accountancy firms and the revolving door between them and the regulator can’t always be seen as an advantage.

    On the other hand we must always bear in mind that people such as Lewis make a living – if not a fetish – out of being negative about advisers. One wonders how she manages her own money? On a DIY basis? Many of these people are professional apparatchiks whose view of the world doesn’t coincide with the reality with which many advisers are confronted. (Or what we consider most normal people). They are in the main clients of the state, with a command economy view.

    As for APFA – as I have maintained on several occasions – they have not been running for 15 years. AIFA ran for around 12 years and they altered the whole thing to become APFA. They might have the same company registration, but that by no means makes them the same entity.

  9. You have to give credit to Nic. He obviously saw the furore FCA Consumer Panel chair Sue Lewis caused with advisers and thought “I’m having a piece of that”. Nic never misses an opportunity to spout the obvious and his constant attacks on advisers is brain numbing. Would MP’s have changed their stealing ways if they were allowed to claim expenses in the same way? Would banks behave as they did 10 years ago if they thought they could get away with it? We all have had to change regardless because that’s how it works. I bet Nic only wishes it was him and not Sue Lewis that caused the uproar because to a less than able journalist this is their oxygen. Its about time someone held him under.

  10. Unfortunately there is no newsworthy content in a headline which says ‘Good news, you can trust professionally qualified and ethical financial planners’ any more than there is any news in a headline which says, ‘A plane landed safely at Heathrow!’

    Nic works in a murky world and I can’t help but thinking that this influences his thinking. May be a spell writing for the Racing Post would be a tonic.

  11. @ Nick B: I don’t mind people slagging off journalists. It comes with the territory. The real problem with your analogy is that a) it doesn’t always reflect what people actually think and b) when it does, there’s a huge amount of truth in it.

    For example, insofar as anyone really believes “all doctors fail to spot fatal diseases” they don’t really blame GPs for it or if they do, they don’t think it’s deliberate. By contrast, people feel real animus towards the financial services industry.

    As for MPs: yes people believe it. But it’s also largely true that MPs have turned inflated expenses claims into an art form that far surpasses anything us hypocritical journalists were ever able to do when I was a rookie reporter – and that really is saying something.

    In other words, people aren’t stupid and the reason they believe certain things is because there’s often some substance to it.

    @ jinker: that’s very cynical way to describe what I’m doing. You’d make a great journalist, if you don’t mind me saying so.

    @ DH: first time I’ve been called a fascist for pointing out that regulation has dragged many recalcitrant advisers to improve their practice. Cracking.

  12. @ NIC

    Just to clarify; It was not a personal attack it was in reference to your (can I say) final solution ?

    IE -: the whole pool must be drained and cleared !

    So hope I didn’t offend you ? well to much anyway !

    Also maybe bad choice of words, but no-one should be dragged kicking and screaming anywhere, least of all by a government body !!

  13. @ Nic I just prefer a world where “large” groups of people are not described as behaving in a particular and generally poor way.

    The reason people believe the negative stuff about groups (Journalists, MPS Financial Advisers) is usually based not on experience, but what they read and hear in the media about relatively “small” numbers of members of such groups. It’s how prejudice is formed

    Just this week you will see an example of adviser behaviour informing FCA understanding in the form of introducing clients to individuals in firm who have better experience/skill of a client situation.

    I bet more often than is noticed it is positive adviser behaviour that is driving regulatory change. But perhaps that is just too positive a message for some

  14. Most advisers I know are working hard for their customers to make their lives a little better. Just saying.

  15. “Cicutti!”

    “Yes boss?”

    “Your last two articles got eight comments between them. And your last article had one! Shape up or you’re out. I expect some absolutely trolltastic clickbait from you this week. I want at least three pages of furious advisers writing rebuttals and looking at our adverts.”

    “IFAs are all bastards and like to eat puppies?”

    “Too strong. Save that for a slow news week.”

    “IFAs should use more deodorant before meeting clients?”

    “Ehh… not strong enough.”

    “IFAs would be crooks if it wasn’t for the FCA?”

    “Perfect! That’ll really rile them up. Can you give me 900 words by Thursday?”

    “Only if I can beg the question by asserting that without regulatory intervention, advisers would not have done things for which the need was created by regulatory intervention, therefore regulatory intervention is needed.”

    “Get typing!”

  16. @Grey area like it.
    @jinker like yours too
    Maybe the best way to irritate journalists is actually to ignore them. The oxygen they breathe is the comment you make. Next month say nothing at all. That would be very irritating. Keep it up with no comments for six months might be hilarious.

  17. I see in today’s MM that the headline to this article has changed:

    “Good advisers swimming against the tide in a still tainted pool”

    This adds a whole new dimension to the debate.

    I think whoever penned this strapline should sit back and take a more commercial view.

    If you accept that there are ‘good’ advises and ones not quite up to snuff, then it follows that those who need and want advice will search out the good. In the same way as one searches for a good dentist, solicitor, accountant etc. (There are some pretty dreadful ones of these about, I can assure you).
    The well-worn mantra of “It is not enough to succeed – others must fail” holds true here.

    When customers have had a poor experience and then come to a ‘good’ adviser (with due deference to Hubris) their eyes are opened and the result is more referrals. I know for sure that this is by no means an uncommon experience and that other ‘good’ advisers also benefit is this way. (I’ll wager that Informed Choice does).

    Yet again the debate seems to centre on those who will not take advice. That isn’t the pool that many of us swim in. It is always a convenient excuse for those who do not wish to engage, saying they don’t trust advisers. In my experience the majority of these haven’t taken advice in the first place.
    When will this industry and it’s so called expert commentators ever come to terms with the fact that financial advice, like legal accountancy, private dental and private medical is only there for those who can afford it and wish to engage. Is it really our job to herd the unwilling? That I would have thought is something for others (Government?) to wrestle with and probably involves education. We are not teachers or social workers.

  18. @Harry
    Agree with your points on who we serve, though there’s room for noble pro bono work for those that are inclined.

    Finding a ‘good’ adviser isn’t so straightforward though. The problem here is that most people getting advice don’t know whether it’s good or bad until much later, possibly many years. They can judge the service and they can decide whether they ‘trust’ the adviser. They can even see whether investments have performed in the short term. But that’s different to whether the advice was any good.

  19. @ Grey Area

    Agree with your remark concerning pro bono – although that’s not business – it’s charity – or in some cases can be put down as advertising (tax deductible!)
    I think you are being a bit hard in your second paragraph. Things change, monitoring is essential, no one is infallible. So you go to the dentist – he fixes it, but in 2 years’ time you need root canal (if you follow my analogy).

    I would have thought the duty is to do the best you possibly can at the time and ensure that the client realises that whatever it is needs monitoring. Just like a garden. If you leave it alone even the best landscaping turns to weeds. (Enough of the analogies – have a good weekend!)

  20. Most people judge whether an adviser is good or not on a very simplistic basis. The first point is whether they like the adviser as a person or not. The second point is whether their investments have increased in value or not over time. If they have increased in value the adviser is good if they have not the adviser is bad. That is about as far as it goes with the majority of people. We would like to think that there is more to it than that. However, in reality for most people it is as simple as that because it is a subject that they are not really interested in and as long as things appear to be going in the right direction then they are happy.

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