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Robert Reid: The execution-only label isn’t working


When I hear the words “execution-only”, it conjures up the image of a firing squad where the soon-to-be victim is given one last cigarette.

In short, it is a term that means something to us in the industry but zip to the general public. Every time we take on clients from a direct seller, they cite the execution-only firm as their adviser. Clearly, the label is not working.

The same is true of the term “professional investor”. If professional footballers can fall into this bracket, we truly have lost the plot. We should either test investors’ competence or make it crystal clear they are operating without the proverbial safety net of both the FOS and the FSCS.

One label more than any other makes me laugh: simplified advice. The term ignores the complexity of people’s lives and the heightened sensitivity for those on modest incomes. 

The FCA would have done much better to concentrate the effort it must have expended on putting together its recent guidance on client education. Simplified advice should not be used as a euphemism for the FOS being unable to intervene if the advice proves to be unsuitable.

The definitions used for professional investors are out of date and in many cases unfit for purpose. Taking a cue from the public health campaigns around safe sex, I often wonder whether investors would be better off if the terms “unprotected investment” or “unprotected advice” were used instead. That way, consumers would be left in no doubt and no false assumptions would be made. Perhaps then investors would understand the risk sits with them and no one else.

If we are to have a respected advice sector, it must be abundantly clear what we deliver and how that differs from those who seek to avoid liability by masquerading under an indistinct label while delivering a lesser product and proposition.

The Government’s guidance service is a massive undertaking where we can demonstrate the benefits of advice and the value it can deliver. This will take a massive shift in attitudes and processes.

Advisers must ensure they emphasise the value they provide. Once people pay for advice, they engage more in the process. What holds advisers back is the focus that was once on products is now on investment instead of planning for a better future.

We must not remain silent on the proposed changes if we want a market to be proud of and which does what it says on the tin. Advice labels in plain English will be the foundation of a safer market. 

The labels we as advisers, the FCA and others seek to impose will be of little consequence to the consumer. Which does not exactly bode well for the Government’s new guidance guarantee.

Robert Reid is managing director at Syndaxi Chartered Financial Planners


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. Agree that definitions are out of date. Like the idea of protected or unprotected investment when it comes to product considerations. What this really means is we need Regulated Products with all others being Unregulated. Same at the advice level. A matrix would then develop that allowed Regulated advisers to deal in Regulated products and Unregulated with all others (D2C) being restricted to Regulated products only.

    This, of course, will never happen as having Regulated Products would involve the Regulator and/or the government in a level of responsibility that they would find unacceptable.

  2. It was much easier in the old days – whenever that was

    Everybody we dealt with got advice and I bet many didn’t realise they were getting it

    Where did it all go wrong?

  3. Charles Campbell 25th July 2014 at 6:06 pm

    Hi Robert,
    As you may know, I have struggled with the concept of execution only. I have always been happy with two types of accounts – Discretionary and Non- Discretionary. Within the Non-Discretionary account, each order/trade/execution is marked either as solicited or unsolicited. There doesn’t seem to be much room for misunderstanding using those terms and has worked for decades in the USA.

  4. Robert and I have much in common, having worked together in Glasgow many years ago. I do however on this occassion find myself at odds with Robert in that in his article he quotes ”the (simplified advice) ignores the complexities of peoples lives’. I am no advocate of sim[plfied advice or any other label but Robert is referring to those clients who are in the middle to upper sectors of the economy, whose affairs require the PhD solutions. In my experience most clients wish to discuss their affairs, often not complex but still testing, who are seeking good advice crafted from experience, professional knowledge and empathy with their position. These people neither have the inclanation, or sometimes the ability, to understand the tortuous terminology of our industry, designed to impress rather than enlighten. In the espoused intention of making ourselves more of a ‘ professional’ , we run a very real risk of alienating ourselves from the bulk of the population. These same people are now precluded by professional fees from seeking advice on their low level, but still very real, problems. Currently we are seeing the next scandal, which has been developing in full sight of the regulators for the last three or four years. The scandal of unethical businesses persuading people to ‘review’ their pensions. This ends up for example, as with one case that came across my desk, where a lorry drivers pension was ‘reviewed’ so that he now owns one bedroom in a hotel in Cape Verde! Not only was he totally unaware of the risks but had signed away his rights by an agents seeking his signature on several pages of closely typed agreement, which he had not read due to the agent pressing him to sign. This is the type of client who is victim to the siren voices of a’ free’ review, subsequent recommendations and a catastrophic re-arrangement of his affairs. If he has sought one of the various forms of advice to which Robert aluded, the cost would have terminated the enquiry at an early stage. Commission has its weaknesses but the obsession with more and more regulation has left the ‘benificiaries’ much worse off. Regulation needs to be totally reviewd, the regulators given two sheets of A4 and told all regulation has to be contained in that space. Regulators saleries would then be determined by how small they could write.

  5. Robert, ‘Protected Advice / Investment’ v ‘Unprotected Advice / Investment’ – What a great idea, this would stop certain D2C providers pretending not to give advice, while providing brochures clearly promoting certain funds as best of kind.

  6. I couldn’t agree more that the language used by the FCA is outdated and unfit for purpose. My guess would be that were you to canvas the man in the street they would have wildly different thoughts on what standard industry terms meant compared to the regulator, such as IFA, restricted, execution only, advice etc etc.

    We need to go back to the drawing board and come up with some terms that the public can instantly recognise without leading to confusion. Protected & Unprotected Advice is a good start. Redefining what independent & restricted means is necessary too.

    As for John West’s example above i don’t think there is much that can be done about unscrupulous “advisers” getting people to invest in a twin room of a hotel in down town Baghdad! ! ! In my opinion absolutely any vessel that a UK personal pension can be transferred to should be covered by the FCA. None of this unregulated malarky. Pensions should be 100% regulated and fall under Roberts new ‘Protected Advice’ label.

    Just my humble opinion of course.

  7. None of this will work unless “products” themselves are recognised as Regulated v Unregulated. Regulated v Unregulated advice has solved very little. We have wasted nearly 30 years trying to regulated the advice process and almost completely ignored the thing which does the damage – the product that the client buys.

  8. Well Robert, you certainly sem to have kicked the lid off the can! I was musing on your protected / unprotected label and recalled our times in Glasgow. During an evening of socilalising, the label unprotected would certainly ensure a lonely walk home.

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