I get quite exhausted these days with all the talk of ozone layers and recycling rubbish. It is only fair that I point out that the latter comment is not referring to the FSA’s attempt to scrap the initial disclosure document and the menu while expecting us to keep using them.
No, I am talking about the hypocrisy of youth. My son regularly lectures me as to why I should recycle the pizza box left over after he orders fast food. I then raise the point that as he and his pals order food for delivery, all these mopeds are damaging the very ozone layer the kids discuss as they eat the pizza.
As we wait for the outcome of the retail review – and let us not forget the wrap discussion paper which is released the same day – I have no doubt that we will need to embrace change a lot quicker than the US has taken notice of the global warming issue.
We find ourselves with principles-based regulation where the main threat to our business is our activities being picked over with the benefit of hindsight. Whatever changes are deployed, we need to ensure that any review of advice is done in the terms which applied at the time.
The FSA recently fined a firm for failings in treating customers fairly where the principal in the business referred to his persistency rate as if it was some kind of compliance dipstick. This shows a complete lack of understanding as to what TCF actually is. It is not a set of reports or a benchmark or percentage, it is a culture. Even when persistency is high, this is no guide on its own regarding TCF. After all, that could just mean the rest of the clients are yet to question issues around suitability.
The way forward is to consider setting up client review panels where clients who are non-experts feed back to the firm the parts of new or existing services that they find hard to comprehend.
In some ways, this takes us back to SIB’s core principles and in all modesty demonstrates the value of my 10-minute bin test. This test involves me trying to digest a new plan or investment vehicle in under 10 minutes and if I cannot then it heads into the bin. Crude but effective, it has helped me avoid split-caps, precipice bonds and with-profits since 1986.
Many advisers are now considering using coaches. I personally have two excellent non-executives who keep me in line and are worth every penny. None of us have all the answers. If you think you have, I would suggest you have lost the plot.
External feedback, help, coaching, call it what you will, is essential for businesses not just to grow but to mature. The review will create change. Change is good. It is the best catalyst when trying to bring about a better proposition for your client and to improve your business.
There is no doubt that we will have real market segments going forward and entry to those areas must be on services provided and not just promised. This is the time to get real and focus on professional advice. This is our time to show that advice is something worthwhile and should be paid for directly.
After all, how much money is wasted on gym memberships when spending it on ongoing advice would be far more beneficial?
If we do not get our message across, it will be more than the ozone layer that will bring issues in the future, in respect of our generation and those that follow.