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Tom Kean: A classic case of not knowing what you didn’t know

I must admit that I am no spring chicken, and financial services is probably the one and only career I will ever have.

Although I have plenty of outside interests, it is other people’s money that has been the main focus of my working life.

I am sure I have lots of bad habits and weaknesses but I must be doing something right, so presumably I have a few strengths as well. I know one of these is honesty. For example, I am not afraid to stick my hand up at events and be the one to ask a (possibly) stupid question.

But time and again over the years, I have been amazed at the things I did not know I did not know, if you know what I mean. It is like the ‘known unknowns’ or, worse, the ‘unknown unknowns’, as Donald Rumsfeld famously once said.

The latest example of this is the ‘fiduciary’ standard of care towards our clients. I can honestly say that, after 30 years of being regulated, I had no idea I did, or did not, have a fiduciary obligation. Most people I know cannot even pronounce the word, let alone spell it or know what it means. A classic example of unknown unknowns if I have ever seen one.

The fund management fee debacle is another perfect example of well-intended regulation going horribly wrong (not to mention wider issues with Mifid II and Priips, of course).

Should UK advisers have a fiduciary duty to their clients?

Witness the bedlam on the provider side of the fence, all swirling around in a maelstrom of IT purgatory at the moment. Even the biggest and best providers are reeling at the work – work that delivers very little benefit to anyone in the real world. In fact, it is now becoming abundantly clear that it is not only confusing people but actually beginning to put them off.

Take the excellent Woodford Patient Capital Trust. Now there is a proper fund. A truly innovative and exciting selection of newer businesses collected together in one huge melting pot, wrapped in an investment trust. Super-cheap, capable of borrowing and with a performance-related fee structure. I may have missed others, but I find it is something genuinely new to talk about with certain clients.

However, there is a catch. Have a look at the Kid document and you will quickly see that its three out of seven risk grading bears little resemblance to the fund’s holdings. It is all very well suggesting us advisers need to apply a bit of common sense to these sorts of things, but that is simply not good enough.

You will not get Woodford giving us a number either – and who can blame it given the subjective nature of such matters?

So, if we must deliberately ignore one Kid risk rating, like we have to with the Woodford Patient Capital Trust, we have to assume we need to ignore them all. It renders the entire exercise a complete waste of time and money because it will be us advisers who get sued if things start to get messy.

While we are here, is there anything else I might not know that perhaps I (and everyone else) should know? What do we not know that we do not know? Now’s your chance to tell us.

Tom Kean is director at Thameside Financial Planning

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