This may seem hard to imagine, given my overall approach to writing, but I’m generally bored by confessional journalism.
First-person writing, where a columnist expresses a viewpoint in the context of talking about him- or herself, is a technique often done to death – as readers will undoubtedly be eager to point out in the wake of my latest effort this week.
I’m also wary of people describing particular approaches to life as ‘schizophrenic’, another overdone word.Schizophrenia, according to definitions I’ve read, is characterised by a difficulty in telling the difference between what is real and what is not, which makes it difficult to act ‘normally’ in certain circumstances.
Sometimes, however, what is sometimes labelled as ‘schizophrenic’ is an entirely normal attempt to make sense of a set of conflicting realities. For example, trying to apply socially-taught expectations not to engage in violent behaviour to personal circumstances such as being attacked by a burglar in your own home.
But after reading a recent column by Phil Billingham in Money Marketing, where he describes himself and the rest of the IFA community as both schizophrenic and hypocritical on the subject of regulation, I couldn’t resist adding my own confessional viewpoint to the debate.
Yes, like Phil, I am probably also schizophrenic. I, too, have a set of conflicting views about regulation, some of which I would like to share with you.
But first, we should examine Phil’s own views, which raise some good points. And so they should: Phil, who runs a partnership of the same name, is a consultant in the elusive art of “assisting financial advisory and planning forms to thrive in periods of regulatory change”.
Fundamentally, his argument is that regulation is a necessary irritant that doesn’t really work in the way intended.
For example, he mentions the fact that we all tend to tick online boxes to say we have read and understood the terms and conditions of firms we do business with.
In reality, we haven’t, mostly because we don’t care or have little expectation that reading them would make any difference to the behaviour of those firms. Instead, we expect Amazon, Tesco and other big online firms to ‘do the right thing’ by us – and generally, with some glaring exceptions, they do.
The lesson for Phil is that if IFAs were to be treated as ‘trusted advisers’ by the regulator, “taking formal and legal fiduciary responsibility for our advice, with no need for caveat emptor, consumers would be better served and the cost of regulation on our firms would be lower – especially FSCS levies”.
The word Phil seems to feel is most important in the relationship between financial advisers and their clients is ‘trust’. If you could achieve that, the necessity for over-burdening regulation would be vastly reduced.
As it happens, I agree with him. If all advisers could be trusted, it would be far easier to offer light-touch regulation.
I also agree – and here is my own sense of schizophrenia coming out – that a large part of the regulatory set-up previously provided by the FSA did not work.
It was reactive and not proactive, it failed to catch the crooked and the incompetent in time, it could be overbearing and it sometimes failed to distinguish between the firms that were trustworthy and those that were not.
In that sense, I do understand some of Phil’s stated sense of schizophrenia, which he ascribes to many advisers: regulation may clearly be necessary, just not to them.
That said, I also think there are issues Phil needs to address. The most important is that regulation, while onerous, is there to ensure the consumer feels safe.
Taking his tick-box example, consumers skip reading T&Cs not only because they “trust” the retailer but also because they are aware, if only dimly, that there is a latticework of laws and regulations to protect them if things go wrong.
A trader is subject to the Sale & Supply of Goods Act 1994, which requires an item to be ‘of satisfactory quality’ in the eyes of a reasonable person and to be as described. Buyers are also covered by the Misrepresentation Act of 1967 and the Trade Descriptions Act of 1968.
If they buy an item that is faulty or it is not received, they can ask their credit card company to apply Section 75 of the Consumer Credit Act 1974 to obtain a refund of the purchase price. Moreover, if they buy something and change their mind, they have additional protection under the Consumer Protection (Distance Selling) Regulations 2000.
In other words: trust, yes, but qualified by whatever rules are necessary to engender that trust. Ironically, there are often more rules to protect consumers in the event of them buying a non-functioning CD player than there are for someone who is mis-sold a dodgy lifetime retirement plan.
Which is why, sadly, while it may be harsh on the majority of advisers who see themselves as unique in their blamelessness, I don’t see regulation being made lighter for them any time soon.
Nic Cicutti can be contacted at firstname.lastname@example.org