Responses to FSA warning on risk-profiling tools
Why not do away with all these tools and now treat all clients as individuals and thereby tailor advice to each client on an individual basis? Is one size fits all finally dead? I think I am suffering from deja vu as wasn’t this what we used to do 10-15 years ago until we were told we had under TCF to treat clients the same, that is, if they were similar clients, they should expect the same outcome. The FSA needs to stop telling us what is wrong and unsatisfactory and start telling us what they consider to be right.
I have been telling clients for years that asset allocation tools only provide a starting point for asset allocation and that a “reality overlay” is essential. Any given tool will produce the same result for a given set of answers today as it would three years ago but yields have shrunk. Hence, three years ago, we were bond buyers but now we are sellers of all but short duration bond funds and high yield but the “models” still say “buy bonds”.
We are also ignoring the “model” advice when it throws up eurozone investments, anticipating a fall in the euro. Is the FSA realising at last that if we are to do the best for our clients, we cannot be answering to those with a traffic warden mentality all the time?
Investment advice will always be subjective. It can be exposed or subject to criticism when exceptional events occur or hindsight is applied. How does the FSA explain this principle in connection with the banking crisis, the single most financial detriment to the consumer in modern history?
Why did it not take into account the banks’ ability to absorb a fall in the value of their investment/ securities? Clearly, it was regulating banks in a similar way that IFAs assess attitude to risk.
If the FSA has found flaws in any platform risk profile tool, then why are they not telling us? Surely it is in everyone’s interest to have this information and be able to act on this.
All profiler tools, model portfolios, etc, will never be perfect. Wouldn’t it be a refreshing change if the FSA lead the way in creating a best practice tool.
Their attitude should be to serve and protect the financial services industry, which in turn would serve and protect the end-user.
Web comments on online story, Europe looks to clamp down on execution-only
The issues about commission do seem mostly to be valid. However much we might like to pretend otherwise, execution-only is often used merely to sidestep normal regulatory procedures and their associated costs.
Then again, we are supposed to live in a free society (although sadly this seems to be a notion under ever increasing threat). So, if someone wishes to invest without any sort of regulatory protection just to save a few quid on advisory costs (which, in any event, are ever more negotiable these days), then caveat emptor. If, on the other hand, intermediaries are encouraging EO for inappropriate reasons, then that should be addressed.
Words almost escape me. So the EU now thinks that we are unable to make any decisions on our own and must have our hand held at all times for anything. My concern is where this likely to lead – are people now to be forced to give up their free will and own right to make their own decisions? Are professional advisers now to be prevented from doing their own business on their own behalf without going through someone else? How long will it be before no one can do anything without asking first. The state is starting to take over our lives and if we want to keep our free will, this type of blanket legislation must be resisted at all costs or we will all loose our free will.
I am all for giving people good advice but things are now being taken to extreme levels by people who are just not considering the future of society as a whole.
I fear that all that will come of this is that even more good profitable businesses will go to the wall. How is this likely to benefit anyone, other than to create even more work and jobs for the regulators until there is no one left to regulate.
The more sophisticated and complex that society becomes, the more simplistic the ruling moral minority become in protecting fools and their money.
The consequence is a dramatic increase in costs, a reduction in choice, lack of competition (because most providers will back away from offering products to the private investor) and increasing fear of dealing in respect of marginal products.
The unintended consequences’ rule is rampant in finance, and the only beneficiary appears to be the regulator.
I am curious as to the expertise of the membership of some of these committees, other than being staffed by people who are expert at being on committees. Do they have any real feel for the topics upon they are happy to pronounce?
And why does finance attract such moral rightists? Idiots can buy powerful cars and kill people with virtual impunity, people can sail on the open sea or walk in the countryside and put the lives of rescuers at risk. No system can perform “the impossible task of protecting fools from their own folly” (Professor Jim Gower). But what it can do is keep a lot of regulators in well-paid jobs.
Alongside this proposal should be a clear statement of cost and benefit, provided by a independent third party (we are already aware of the manipulation of figures by the FSA). There may be a need but first prove it, do not assume it.
If execution-only is removed as a business model option and the RDR is introduced, then presumably the majority of the population of Europe will have to pay for proper financial advice or not get any. So who will now pay for those that don’t and end up creating even greater dependence upon the state/states?