The anti-adviser outbursts by Sue Lewis of the FCA Consumer Panel and Caroline Rookes of the Money Advice Service will harm consumer interests not help them.
If you have read the recent Money Marketing articles and Nick Bamford’s subsequent comments, you will know Lewis and Rookes have embarked on separate Hector Sants-style campaigns of megaphone diplomacy by implying all financial advisers are crooks.
Before your blood boils, you should realise advisers are not really the intended audience. I suspect Lewis and Rookes sense a change in the political winds. I think they wish to protect their well-paid sinecures as consumer champions by attracting the attentions of their potential new Labour masters.
Other advisers have highlighted the factual inaccuracies, the dubious ethics of a public servant (Rookes) lobbying politicians and the potential harm to consumer confidence.
I want to point out how these statements will harm consumer interests by introducing moral hazard into financial advice market.
I don’t know about you, but what keeps me on the straight-and-narrow is a combination of influences.
I get immense pride from helping my clients reach their financial goals. Some people call this ethics. All I know is that helping people makes me feel good.
My clients know where I live. They bump into me at the supermarket and refer most of my new clients. If I was a crook the word would get around quick. The damage to my social standing and finances would be swift and difficult to recover from.
The way I charge my fees aligns my long-term financial interests with those of my clients and this helps making good recommendations easier.
The regulatory system is (mostly) on the same side. Virtually all the FCA and FOS frontline troops I meet are decent people who want the same good outcomes for clients.
But sometimes when I get really low I think the regulatory system is more like Franz Kafka’s The Trial. Spoiler alert: One day the protagonist is arrested for no apparent reason. He then watches his life unravel as he journeys ever more desperately through a justice system which exists only for itself. Eventually he is taken outside and shot.
I count myself extremely fortunate that I am in a position where my faith in regulation is just the icing on the cake. Other advisers are less fortunate. If you work in a firm with a poor culture and short-term incentives, ethics alone is a poor defence against misselling and a faith in regulation is the backstop.
Lewis and Rookes’ outbursts harm consumers by giving advisers the impression that the regulatory system is out to get them.
If you think that, however compliant you are, you will eventually be taken out by the regulatory system and metaphorically shot, then you are less inclined to think about the client’s long-term best interests.
By implying that all financial advisers are crooks, Lewis and Rookes give those advisers who might be inclined to become crooks a justification for doing so.
So apart from being factually inaccurate, ethically dubious, harming consumer confidence and giving the few potentially crooked advisers the excuse they need, everything Lewis and Rookes have said is fine.
Martin Wheatley needs to have a quiet word with both before they do any more harm.
Tim Page is a director at Page Russell