For as long as I have been involved in financial services (approaching 30 years), members of this industry have craved a status in the public eye on a par with solicitors, accountants, doctors, etc. And yet, every attempt to require a demonstration of that kind of status routinely meets with opposition and vitriol.
It is not acceptable to claim that experience makes a good adviser. That is a bit like saying that everyone who passed their driving test 25 year ago is a great driver now.
The RDR, like it or not, gives us the chance to achieve the professional status to which we all aspire, and there are reasons to be cheerful – but only if you want believe it, and embrace it rather than find reasons to resist and deny.
The diploma qualification provides the opportunity to demonstrate that advisers really know what they are talking about. T&C requirements to maintain that knowledge (and extra knowledge under the new definition of independence) will only add to the confidence consumers will have in their adviser.
Knowledge is part of what creates value (only a part) and part of what consumers should value. When you pay for an operation, a large part of what you are buying is the surgeon’s knowledge that he knows where to cut.
Rejoice in the knowledge – be cheerful.
Time and again (the latest being Park Row), FSA sanctions revolve around unsuitable advice, or potentially unsuitable advice, and often the underlying driver is the risk of “chasing commission”. The FSA are therefore doing us a favour by taking away that risk.
In simple terms, if commission does not exist, nobody can be accused of chasing it.
How brilliant is that? Be cheerful.
When I ask IFAs what they do for a client, they pretty much always describe an advice process that fits with the answer the regulator is looking for. They then go on to tell me that the process itself is free and that remuneration is down to the existence of a product.
That means the value of what an IFA does needs to be redefined – or in many cases, defined for the first time. When that happens and it is then promoted properly, consumers will pay. The first step though is that IFAs must understand where they add value and believe that they do so.
Here’s the reason to be cheerful – what advisers do for a client, and the way they do it, on a day-to-day basis, does not need to change one iota. What does need to change, in general terms, is the belief that what advisers do is sufficiently valuable that consumers will pay for it.
Consumers have to understand that but advisers need to believe it first.
I read somewhere recently a comment by an IFA that the concept that advice is free and fees carry a cost was a “consumer-led perception”.
Consumers have never created any perceptions about financial advice, everything they know and understand about financial advice has come from the industry itself. Our challenge now is to change those peceptions.
The really good news is that we have the opportunity to do so, and change is within our control.
Martin O’Connell is managing director of ProVision