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Tom Kean: The uncomfortable truth about regulation

Despite the vast cost of the FCA and Money Advice Service many clients are still unable to navigate the world of financial services without advice.


I love it when something crosses my desk that gives me fuel for this column, which I am privileged to be able to write every once in a while.

The fact that I find this particular endeavour cathartic is possibly telling; why do I feel the need to vent my spleen all the time I wonder? Talking to friends and colleagues I’m not alone in this.

Anyway, back to my latest grouse which concerns a client of mine who was frank enough to tell me he had been looking online at alternatives before approaching me to effect a modest annuity for him.

He is a decent sort fundamentally, and has been a ‘slightly objecting’ fee payer over the years, which is fair enough. So his approach did not surprise me in the slightest when he said he’d obtained a quote from someone online before running it past me.

There he was, a perfectly intelligent man, who had done his research beforehand but who did not have the confidence to convert his modest fund into an annuity without someone’s help, which, if I’m honest, perplexed me a little.

Digging a little deeper into his thought process and what he’d tried to do up to that point, it became clear he’d seen the flaws in the Money Advice Service, (and incidentally was flabbergasted it was us IFAs who pay for it – he had no idea) and that he simply did not trust any of the online propositions he had tried.

I had a look at a couple of them and I am not surprised he was stumped; the lack of clarity on these sites was dreadful, and even after closer scrutiny it was not clear who or what they were, who paid them for their service and if they were independent or otherwise.

As dull as it sounds, I’m afraid I was his trusted default position after all these years, which I took as a compliment in fact.

The truly disappointing aspects of this episode for him, however, were twofold. First, that he felt attracted to the MAS for advice at all, when we all know it offers nothing of the sort. And, second, that his subsequent efforts online left him so full of doubt he felt compelled to pay us our £500 minimum fee for what is actually a straightforward transaction.

The fact that we have to charge £500 in the first place is bad enough, but as we all know, the amount of paperwork makes this charge seem cheap these days; it is the fact that his default course of action is still not predetermined and mapped out for him.

Not that I’m ungrateful of course – this is good bread and butter business and an important part of our profession’s commitment to the public. But it is the uncomfortable truth that after all the FSA/FCA’s RDR work trying to clarify what we all do for the consumer, it is clearly an unmitigated flop.

Many have suggested that because our regulator has such an impossible and thankless task on their hands they may as well not try. As mad as that sounds, just think of the savings the whole country would enjoy, enough to subsidise a fantastic compensation scheme, leaving the rest of us to enjoy writing business and advising clients, unencumbered by the minutiae of our now needlessly burdensome existence.

So once again, loud and clear, please can we be left alone, just for a while, to let the dust settle a little?

Tom Kean is director of Thameside Wealth Management


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Tom, in a word Brilliant !

    I think this highlights exactly how ignorant the FCA are to what a client wants/needs, and what we do as a profession.

  2. Such a story, by no means exceptional, demonstrates just how wide of the reality mark is Martin Wheatley’s suggestion, quoted just a month or two back in these very pages, that those who can or will not pay what IFA’s now have to charge for their services can simply go online and sort out their affairs for themselves. Obviously a man with his finger on the pulse of how the industry works ~ not. Were such a suggestion remotely realistic, why is he now admitting concern about the advice gap?

    Meanwhile, Tracey McDermott would have us believe that the FSA doesn’t want to burden IFA’s with compliance, whilst the FSA yet again is kicking around the battered old can of a simplified advice proposition, which can never come to fruition unless three quarters of the current RDR requirements are set aside. You can’t have one (which is what practitioners and our clients desperately need) without doing the other (which the FSA would find to be an almost impossibly radical step to take, as it would constitute an admission of and action on the fact that most of the RDR is a massively costly and OTT sledgehammer to crack a relatively small nut). So, more than ever before, IFA’s find themselves between a rock (excessive compliance requirements) and a hard place (having to charge fees that more and more clients find unacceptable). Hardly a brilliant outcome.

  3. That’s a good article Tom. I’ve had a few group scheme members and prospective new clients approach me with small pension funds so I’ve shown them how to find MAS and given that option first having explained our minimum fees. Two or three weeks later they’ve come back asking for me to implement an annuity for them or whatever.
    You can lead a horse to water, but you can’t make it drink……
    I n these circumstances, we need a non advised face to face service for some individuals that does not load the risk on to the advisory firm (as they are not providing advice) and increase the cost for the consumer OR better still increase the trivial pension limit to about £40,000.

  4. Tom – I often think I am mad until I see other people saying the same thing as me

    I was highlighting the possible customer detriment after DRD – your client clearly ended up in the right place but still too many people end up in the wrong place because they do get the right information.

    I do think it is possible to help people get the right outcome by taking a step by step approach but the current rules don’t help

    Perhaps if enough of us highlight the problem something will be done about it

  5. To Billy Burrows ~ how many of us d’you think might be “enough” for the FSA to take any notice?

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