With just over a year to go to the implementation of the RDR, there is still so much to do. Last week’s announcement of HSBC’s fine as a result of inappropriate advice provided by its subsidiary NHFA demonstrates why so much of this change is necessary. It also highlights the huge cultural change that some organisations and individuals have to go through to meet the challenges ahead.
Some see the RDR as a need to pass exams, sign up for a statement of professional standing and meet the minimum requirements of CPD as set out in the regulations. It is all seen as a process of compliance rather than a way of doing business and behaving like a professional.
Unfortunately, many will sign up to a code of ethics without reading it or indeed applying it to their business. Many are probably members of a professional body, yet are unable to apply the current code because of the internal procedures within their firms, which throws up further challenges. Regulation and commercial override has led some bigger organisations to fall foul of the need to do the best for the client, even though the process itself might have been compliant with the regulations.
The new environment provides the ideal opportunity for us to put the clients’ needs first again. Through this fiduciary responsibility, we can improve recognition of our profession and trust in the sector.
When properly applied, the financial planning process must put clients’ needs at the heart of the relationship and service. It relegates product selection from the forefront of the conversation to the tail end of the process, becoming just a vehicle to help the client achieve their goals. Research shows that the client does not attach strong value to the advice given on product selection. Similarly, the vast amount of work that goes into compliance, research and plan preparation is just a means to an end. What clients really want and value is a professional business to help them sort out their affairs and make effective plans for the future.
They value the relationship and the ability to trust the business and individuals they work with to ensure that they are on track to achieve their goals and objectives in life.
Delivering a financial planning service is far more than passing level four exams, just as customer-agreed remuneration is far more than just having a tariff to present. Similarly, selecting an accredited body for most is about far more than just getting an SPS.
From the accredited body, there should be far more engagement than simply ticking the boxes and issuing the statements. There is an opportunity to build a profession for those that are prepared to commit and to participate. Signing up to a code of ethics should mean far more than saying a process is compliant.
Next year, we will see a scramble by many to finish level four qualifications and an even bigger scramble to sort out proper gap-fill ahead of applying for SPSs. This will be alongside the panic that will set in to organise business processes to be ready for 2013. The IFP programme of events is tailored for both established and transitioning businesses.
Nick Cann is chief executive of the Institute of Financial Planning