As we head towards N2, it is important for financial advisers to take
stock of their attitude to professional standards.
Our experience of regulation for the past 13 years could be said to have
produced a dependency culture where people look to the regulator to tell
them about standards.
My question is whether the regulator is the sole source of professional
standards or whether such standards come also, or maybe primarily, from
somewhere else. What is the role for self-regulation and self-discipline?
One of the reasons I cut short my regulatory career and moved into what I
suppose I could call the voluntary sector – advising the LIA on its public
policy – is that I felt there was a significant role for a movement which
fostered professional standards for financial advisers. I have seen at
first hand in regulation the limitations of trying to impose standards from
We all know that no amount of legislation will make people moral. Whether
appropriate professional relationships or activities result from what we do
depends far more on our motivation and self-discipline, which is an
expression of the desire to do the right thing.
On a purely pragmatic level, the enforced, by definition, outnumber the
enforcers. No amount of threats, dawn raids, fines, rulebooks, etc, will
ever really work unless the enforced are people who wish to adopt
particular standards for their own good reasons and not because someone is
I remember discussing with colleagues at the time when the Financial
Services Bill was first mooted how the new legislation could clarify the
roles of various organisations which had become embroiled in regulation
because there was no one else to do the job. The role of punishment would
quite properly go to the statutory regulator, leaving a much more positive
role for a trade association of trying to encourage and incentivise higher
That is even more the case nowadays when we have a fully statutory
regulator as opposed to so-called self-regulators. The role of associations
such as the LIA must surely go far beyond any regulatory prescriptions by
offering incentives to their members to become professional practitioners.
Of course, the other role of such associations is to lobby to change the
regulatory rules. We can try to alter the environment within which
financial advisers work but that is not really enough if we are ever to
regain public confidence. It is still talking about framework and not about
My conclusion is that the advent of a single regulator will give a
considerable boost to those associations and institutes which want to
foster higher standards. We now have a much clearer focus on what we are
supposed to be doing – not just dancing to the tune of the regulator but
looking more widely at how the profession can serve its public.
Regaining a reputation means you need to do things better so I would
expect and hope that organisations such as the LIA would be seeking
opportunities to make members more professional and more helpful to those
Two areas have already made headlines. Both are of considerable interest
to the LIA and we have been a participant from day one.
First, the Financial Adviser Toolkit project, co-ordinated by the
Financial Services National Training Organisation and supported by most
industry bodies, provides examples of best practice in operating a training
and competence plan within an IFA firm. We hope this initiative will go
further. A series of workshops is planned by the FSNTO and supportive
organisations which will help IFAs to implement the ideas in it.
We have started a voluntary process here, encouraged by the FSA, whereby
the industry is looking to produce higher quality from the starting point
of the regulatory rules but taking the principles in them a lot further.
My second example is the ABI's Raising Standards initiative. I know a lot
of IFAs are quite sceptical about this project so it has been interesting
in recent weeks to see the positive comment appearing in the newspapers
about the revised documentation to go to clients. One particularly
vociferous journalist has been tempted to praise the industry.
I think we should all put our weight behind working on the Raising
Standards initiative and encouraging the ABI in taking further steps down
this route. That is certainly what the LIA is doing.
Can we codify best practice in other areas? Take, for example, what I like
to call shop window issues – what the public sees from the industry.
IFAs often complain about the media but let us think what people in our
profession are doing to foster media comment or to give rise to negative
perceptions. What are the public seeing in the way that IFAs and insurance
companies hold themselves out in the marketplace? What do they gain from
the raft of designatory letters people have after their names? Are there
ways in which we can improve images which are being generated by the
I remember a few years ago, in an LIA initiative which was described by
BBC television as “the charm offensive of the industry”, the LIA put
forward point-of-sale literature which was used by many advisers. I am sure
it must have created good perceptions.
We let that drop through lack of support. Indeed, I have said to the FSA
many times that some of the excellent literature which it has been
producing should be circulated via IFA offices.
Generally speaking, the FSA has been totally unwilling to discuss this in
any realistic way. What can we do to make sure that everyone who sees this
industry gets a positive message from whatever they see?
It may seem a somewhat wacky idea but I wonder whether the industry could
start its own newspaper aimed at the public.
We do need to have a positive examination of the issues I have been
discussing. I would be interested to hear from anyone who agrees with this.