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Rationale thinking

I wrote in these pages last month about the need for the financial adviser sector to take ownership of its reputation by a determined effort to improve its practice and performance.

Obviously, to take this forward, there would need to be organisation. The big question is whether any of the existing representational or educational bodies have this focus. I leave aside the question of the regulatory body (which, of course, does have a key interest in this area) because success depends on our sector developing in the right directions within the regulatory framework. You might describe this as a form of self-regulation but I would call it good business sense.

The question I ask is what we are really here for, ultimately. Every organisation in the industry or the financial advice profession has stated objectives but quite often these do not state the ultimate objective, which must surely be how we serve the public good.

Maybe it is because people have not thought through their rationale for existence. Sometimes it must be because it is easier just to do the familiar. And part of doing the familiar is to make an excuse of the existence of regulation to say that “they” have failed to tell “us” what to do.

Taking, for example, membership associations in our sector (and there are a good many of them), quite often, it appears that the main indicator of success is membership growth. If you are just in the business of making a success commercially, perhaps that makes sense. But I would ask, is it enough? What about the ultimate customer, the clients our members serve, and the public interest?

Private enterprise spawns initiative. It is particularly good at offering incentives to people to pursue opportunities. But often, those opportunities are about commercial success alone.

So really what I am saying is that the marketplace needs to be challenged to look at where it is headed.

Even looked at from a commercial point of view, the story of the last 10 years or so can hardly be seen as a success. We had over 200,000 financial advisers at the beginning of the 1990&#39s, we are now down to about 70,000 and, in the so-called tied sector, the numbers are still falling dramatically.

It remains to be seen what the changes resulting from depolarisation will do. And, of course, one of the Government answers is to reduce the rules in favour of some kind of supposed safety factor built into products.

Suffice to say that such an approach is probably suicidal, bearing in mind the suitability problems that existed before the Financial Services Act 1986, which we have spent so much time trying to eliminate from the marketplace.

What is needed is a radical rethink or all our education and training arrangements, not least the underpinning incentivisation of consumers facing development.

Ultimately, we want the public to benefit from having sound financial arrangements, bearing in mind that increasingly they cannot rely on the state or anyone else to bail them out. It is not just a matter of selling products, the possible value or disvalue of those products in future economic scenarios need to be evaluated through good quality advice.

The LIA is looking at the development of business skills courses and it is likely that some other bodies in our marketplace will join in that. But it remains to be seen whether the objective of developing financial advisers to the point where the quality of business is notched up a level or two and an evolutionary process is put in place to develop even further, will be achieved.

To achieve such an objective requires imagination, leadership and, above all, unity of purpose. It requires all our examinations, training, development and standards to serve the objective of treating customers fairly, with commitment to their long-term good.

Write in to Money Marketing or to me if you believe as I do that not only the future of financial advice but also the future of financial security for the public is at stake. We have some serious work to do, going far beyond merely lobbying for defensive reasons to reforming the way we approach and conduct our business.

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