The words level playing field have never felt more patronising than now. The Keydata levy, compared with minimal fines being levied on banks, leaves me cold.
Recently, as one of my friends entered his bank to make a deposit, he was accosted and asked if the bank could provide an investment proposal. He asked them what details they needed and that is where the wheels came off, as he became what is called a non-advised sale.
Did the bank employee determine his risk profile or his capacity for risk? Did she even get his date of birth, marital status or health details? The answer is no on all counts. She seemingly did not need to as he was non-advised. Yet if you ask him what happened, he says she advised him to buy product X (deposit-based structured product).
I hope the FSA soon realises that giving something a cute name – generic advice or non-advised sales, for example – is a waste of time. It is the client who decides if they have received advice or not. When we acquire clients who give up DIY investing, in many cases they refer to the advice the platform gave them. Not information, not guidance, just advice.
Non-advised is just another term for execution-only and IFAs are expected to simply execute an order. But the banks seem to be able to market products to clients when they have never requested them.
I look at Clarkson Hill and note the sales of unregulated collective investment schemes, VCTs and EISs, yet from the average level of investments it is unlikely they had so many experienced investors. This and the fact that fund selection was at adviser level made it an accident waiting to happen.
It is one thing giving advisers some freedom to express themselves but too many firms have no handle on what is happening in client meetings. To be fair, some of the issues flow from poor risk assessment and I see risk questionnaires where answering at each end of the scale all too often outputs as balanced.
That is not to say assessing risk capacity is easy. In fact, without a cashflow, it is hard to see how it can be done. Many clients are unable to even indicate the monthly budget they need, so just how they will be able to answer questions on capacity remains a mystery.
There is no doubt the topic of risk profiling will remain at the top of the list in relation to the suitability of advice. The FOS has already made it clear that a complaint about Ucis is almost always found against the advisers as they cannot prove the investor was highly experienced. Evidently, owning a with-profits bond does not cut it.
If the retail distribution review is applied as intended, some major institutions will withdraw their advice arms. If they are replaced by non-advised sales, then we have failed the consumer.
I am all for ensuring the client remains central to our activities but I resent the fact this is not seen as being necessary when you are a major institution. If treating customers fairly is to have any lasting impact, some heads need to roll – and quickly.
Robert Reid is managing director of Syndaxi Chartered Financial Planners