If Hollywood produced a screenplay of the RDR, as scripted by the FSA, no one would make the movie as it would be deemed to be unrealistic. If it did get made (David Lynch as director comes to mind), one would not know whether to categorise it as science fictional fantasy, a psychological horror thriller or perhaps a Carry On farce.
The best analogy is what the Government has done with home information packs – ill thought-out ideology with no sense of practical expectations.
I believe I live in the real world but the mavericks at Canary Wharf occupy some parallel universe where logic seems to be outlawed. It is good that they think out of the box – the only problem is that they are so far out of the box, they have forgotten their original purpose.
In the real world, the FSA:
- Would understand and relate to the marketplace that it expects to serve and protect.
- Would recognise that the vast majority of the public do not want to buy financial products and services. They need advisers to inform, educate and, in many cases, persuade them to take action.
- Might therefore realise that, in the vast majority of cases, clients are reluctant to pay fees for something they did not want in the first place.
- Would appreciate that higher qualifications do not necessarily mean better advice, they simply mean higher qualifications.
- Would appreciate that, as in any industry or profession, there will always be some rogues. That’s life. Destroying a whole generation of advisers, just to tackle a few rotten eggs, is hardly conducive to better serving the public or maintaining market confidence.
- Would admit that depolarisation was a disaster, as predicted by a number of commentators, including yours truly.
- Must accept liability that the UK savings ratio has collapsed while on its watch. Tinkering with the system does not build confidence in the marketplace but achieves the precise opposite.
- Should recognise that commission in itself is not evil but serves a purpose of making it easier for the public to buy the products they need. Transparency in how an adviser gets remunerated is what is important and initial disclosure documents do not achieve that, either.
- Would acknowledge that if the authors of the RDR are not themselves commission biased, what gives them the moral authority to be believe that the majority of advisers would be?
I could go on and on – and I certainly will in my response to the RDR – but you get my point. Perhaps I should give some context to my comments.
I have no aversion to qualifications, having gained ACII 15 years ago. I also have no aversion to fees, having been very much fee-based for many years. I should have no problems in meeting the FSA’s proposed criteria for a professional financial adviser but that does not mean I think the criteria are right, unlike some self-interested professional bodies which have no care for the effect on society.
It cannot be right to dismiss a huge section of the advisory base as inadequate because a relatively small number have some initials after their name. And it seems that specialist advisers cannot call themselves professionals.
It cannot be right for the FSA to admit openly that its proposal will result in restricted access to relationship-based advice or “sub-optimal outcomes”.
It is totally bizarre to think that “independent” is perceived by the public to have any meaning other than unbiased, as opposed to restricted, advice. It has been 20 years since legislation designated this word with a specific meaning and it has taken 20 years of marketing and public awareness to drive home its value. That is a generation of people who would need to be educated on a new use of the English language.
People are already fed up with the jargon and bureaucracy that we are obliged to feed them. What kind of confidence will changing accepted language inspire in the real world?
Bhupinder Anand is managing director of Anand Associates