People do not necessarily consider financial services from the other side of the desk – and of course, why should they? They turn up at the office of an Independent Financial Adviser (IFA) seeking advice and answers for their specific situation.
But we thought it might be helpful to share some insights into the effects of the relatively recent ‘Consumer Duty’ regulations brought in by the Financial Conduct Authority (FCA) and the impact it is having on the profession.
The new rules are well-intended and have driven-down excessive costs, but at the same time they have seen regulatory costs for firms escalating significantly.
On top of this, a recent poll amongst advisers, often the financial therapists for their clients and not ‘salesmen’, has shown that for many they have ‘had enough’.
The apparent barrage of regulation after regulation to better protect consumers with ‘good outcomes’ is also creating a number of unintended consequences.
Such as 35% of those quizzed noted it was all affecting their mental health and to such an extent that as many as half of those quizzed said they are considering leaving the industry. There is already a significant shortage.
Another survey said that for 63% of respondents, the demands of ‘Consumer Duty’ are affecting their ability to do their job.
An article on the subject remarked that if an adviser cannot care for their own mental health, they are of little use to the hundreds or thousands who rely upon them to look after their finances.
Indeed, the FCA notes that its regulation in the future is likely to be ‘more targeted, intrusive and assertive’, all words not really encouraging the advisory community to want to remain doing what, in the vast majority of cases, is a great job.
Another consequence is that the ‘smaller investors’ are likely to be drummed out of advisory contact as to service them is unaffordable.
Most advisers have happily tried their best to give guidance to ‘everybody’ but stringent rules and the related costs will stop that being able to happen.
For example, the recent ‘Retirement Income Review’ regulatory regime and its colossal burden upon advisers, could mean that anyone completing the full programme of demands would have to charge perhaps £2,500 plus VAT just to satisfy the time cost.
Is someone with a £50,000 pension going to pay that and can an adviser justify trying to charge the investor that anyway? No.
So, where do they go for advice when they really need it, on what are the best options for them based upon their unique personal circumstances and needs according to their overall situation?
If you have an independent adviser who will help you and does a good job, value and cling-on to them!
The Regulations have a number of obligations and one is to increase the accessibility of financial advice for the masses, but such outcomes for advisers would make it seem this is going into reverse.
The rules also have an objective of supporting and encouraging the financial services’ sector as it is so important to the UK and its economy.
However, excessive and disproportionate interpretation does the opposite, as well as resulting in dumbed-down offerings which people have to buy, in transactional and unadvised relationships with big providers only. It that really best?
Maybe a change of political administration might alter the emphasis and indeed start to rebase any negative rhetoric, which perhaps could start by recognising how great the average adviser and provider of financial products is first, not starting from the notion that they must be creating bad outcomes and charging too much.
