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The definitions used for professional investors are out of date and in many cases unfit for purpose.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