please, please please stop

There is a marvelous moment in “Blackadder goes Forth” where Capt. Blackadder, getting rather irritated by the lack of humour that he finds in Charlie Chaplin movies dictates a telegram for ‘Bob’ to send to Mr. Chaplin.

It went “To Mr. Charlie Chaplin, Sennet Studios, Hollywood, California. Congrats stop. Have found only person in world less funny than you stop. Name Baldrick stop. Signed E. Blackadder stop. Oh, and put a P.S.: please, please, please stop”.

Well in the English language today there is a version of something that has gone beyond funny in a similar way.

It is the pervasive use of the word ‘Consumer’ in everything that involves somebody paying for something, anything it would seem and inevitably it finds itself, almost by magnetic means, drawn toward and in many cases slamming into the world of regulation.

Wikipedia defines a ‘Consumer’ as “the one who pays to consume the goods and services produced. As such, consumers play a vital role in the economic system of a nation.

It goes on to say “typically, when business people and economists talk of consumers, they are talking about the person as consumer, an aggregated commodity item with little individuality other than that expressed in the decision to buy or not to buy”.

But for small financial services businesses (as well as large one’s) what is meant by this sterilising terminology of ‘consumer’ is actually a customer, a client who you value and provide advisory services, in return for the services rendered you expect to receive a reward, monetary mostly, in return.

What is wrong with the word customer or client today?

It seems its loss of use is an act of political correctness, describing something, a concept in fact, that was previously very well understood as something else with a very different name but meaning the same thing.

Could it be that this type of grammatic engineering, a complete waste of time and effort on somebody’s part, is to justify their own existence in the workplace? Very apt across UK regulation today.

Are these the same people who have now recatagorised the casualty department at a hospital a ‘triage unit’ or emergency staff like police, fire and ambulance staff attending to an emergency now being called ‘first responders’?

Now if we move on a bit, Wikipedia defines a customer as somebody who : “purchases goods; a consumer uses them. An intermediated customer is not a consumer at all and customers who buy services rather than goods are rarely called consumers”.

Wikipedia, when referring to the ‘Consumer states  “In the absence of effective consumer demand, producers would lack one of the key motivations to produce: to sell to consumers”.

Never has it been more important for the FCA to take note of this very simple observation in a post RDR world, because if the industry wounded keep getting ‘bayoneted’ by the regulator, there will no longer be any sustainable industry left to regulate.

Can we please stop inventing new names and processes for something we all understand and have interacted with very well over so many years.

In the best Blackadder tradition, my telegram to Canary Wharf would read:

“Have found only word in world less appropriate to describe financial advisers’ customers. stop. Signed D. Bradley stop. Oh, and put a P.S.: please, please, please stop”.

get well soon

Sir Hector Sants is taking a leave of absence from Barclays due to exhaustion and stress and is expected to return in the New Year”.

A headline that appears to have received little adviser attention but seriously needs some on a number of counts.

Firstly, stress in the workplace can be a terrible and debilitating condition and in that regard we would genuinely wish Sir Hector a speedy recovery.

Stress can be defined as the way a person feels when the pressure they are under exceeds their ability to cope.

Although financial advisers should have some sympathy for anyone suffering from stress in the work place, I suspect many would be asking how somebody with his work experience, track record and remuneration package could possibly be stressed.

Sir Hectors’ annual compensation package is reported to be in the region of £3m and he only joined Barclays in February this year, albeit amid some controversy.

But everyone reacts to stress differently depending on their personality and how they respond to pressure. Many things, such as work, money worries or relationships can cause stress. It can cause psychological symptoms, such as anxiety and irritability, and physical symptoms, such as poor sleep.

Some questions often asked by sufferers include how can I relax after a tough day? Can stress affect my sleep patterns? Can stress cause other illnesses?

Sir Hector, many in the financial services industry have suffered from exhaustion and stress along with some of the worse side effects that come with it over the years. Much adviser stress today is brought about by dealing with the impact of poorly thought out expensive regulation upon their businesses and a considerable amount of that has come over the last five years in tandem with the run up to RDR, and on your watch.

We see stress-inducing examples of the regulator behaving very badly toward those it regulates; withholding information, being unprofessional’ and lacking integrity, hounding retired advisers and their spouses, it would seem almost to the grave, for lack of a longstop – which many believe the regulator consciously removed and would not reinstate despite so many requests to do so.

Coincidentally much of this type of activity took pace during the very same period that ‘Sir Hector’ headed up the FSA. This was the same man who told firms and individuals they should be “very afraid” back in 2009 when speaking to an audience in London, Sants  also said that to stop a “similar crisis” in banking happening again, the supervision of banks would have to become more “intensive”. He said the FSA, now the FCA, would take action if it thought the judgments of senior managers in financial institutions were “too risky”, even if it carried the risk of stifling innovation.” This is a fundamental change,”he said.

So is there something else amiss internally at Barclays, who only this week have topped the FCA’s table of ‘most complained about firm’ list again that a spot of sick leave will enable the matter to conveniently resolve itself with ‘Sir Hector’ out of the way either on a temporary or permanent basis?

After all, you cannot be gamekeeper and then turn poacher without conflicts and repercussions?

Advisers and others in ‘regulatory thrall’ will see that he certainly need not worry how the bills are paid as his £3m pay package will continue, his employer will no doubt be able to provide access to excellent medical care and cognitive support, his pension benefits are secure and the area of the business he is responsible for has staff levels of around 1,350, so he need not worry about how the business will cope in his absence.

So if Sir Hector is finding life stressful, during his recovery he may wish to reflect upon the stresses caused to many advisory firms by the FSA’s poor behaviour as outlined above, expensive, poorly thought out and executed regulation, all on his watch, over many years.

And he may also reflect upon all the resulting lost businesses, lost futures, lost jobs, lost retirements, the removal of the longstop and more that so many lose sleep over still. At least he does not have to endure that burden.

It is said, “reality is the leading cause of stress among those in touch with it”, get well soon Sir Hector.

Doom & Gloom

No, not the recent Rolling Stones album, but will the FCA next find fault with adviser servicing fees with ‘Miss- billing’ as their next scandal?

Recent forums discussing financial adviser remuneration, employment status and fees have highlighted one more unseen, unintended and possibly unfortunate consequence of the RDR.

Miss billing, or, as the FCA boss, Martin Wheatley has labeled it, miss-dealing.

One of the key aspects of the RDR was to remove the bias that could be created by commission. However, as Martin Wheatley has already pointed out, “In some cases, firms are charging a percentage of product investment, and clearly it takes away product bias in the sense that we are no longer seeing firms recommending particular products because of the payment that comes to them, but it does not take away ‘dealing bias’, because if you only get paid if people buy a product, then you are going to want them to buy a product rather than pay off debts or do something else.”

There is no disagreement that financial services advisory firms need to generate revenue to survive, thrive and grow. To do this they now need to ‘sell’ their service proposition, not a product.

In previous times, adviser businesses were driven by sales.  Those doing the ‘selling’ were multi-taskers – people who could prospect, identify a need, devise and articulate a solution, execute that solution and as a result they would see reward and their business, if enough solutions had been ‘sold’, would see survival turn to growth.

‘Sales’ is now seen as a dirty word, but let us not forget that these people did create wealth – not just for themselves but importantly for their clients, their employers and those provider firms too who’s policyholders and investors they introduced. That wealth went to create jobs, pay good salaries and the outcome was almost always happy clients with savings if the latest FOS figures on adviser complaints are to be a yardstick of success

In the post RDR world the prospector and the salesman are still needed and a vital addition to any successful business. But even more important is somebody to bill.

However, if commission bias has gone along with commission, will the FCA now see miss-billing as an issue, with fees charged yet seeing nothing tangible being done at all?

Miss selling has often been identified with the benefit of hindsight, but accusations of miss billing could be much more difficult to counter and possibly difficult to spot too. With advisers under increasing pressure to survive post-RDR, and regulators seemingly concerned at the cost of and access to advice, could this be the next ‘big thing’ that the FCA focuses on?

We hope not, but there is already much division about the possible consumer detriment of charging fees based on funds under management versus time with time often looking more ‘professional’ and representing better and purer value for the client.

But the possibility of the regulator looking closely at adviser charging models to see if they create work simply to raise a bill is a spectre that may loom large over some firms looking to survive the harsh reality of the post RDR world and the prospect of trail removal. After all with average fees being around £150 per hour, a couple of hours of creative billing per client over a year for a firm with a segmented client base of around 250 could soon generate £75,000.

As one industry expert observed, “the days of small advisers earning £250-300k a year have gone with RDR and there is a sense that the regulator does not like to see anyone earning a lot of money where financial advice is concerned”.

Of course the problem with that mindset is that if firms do not make decent returns, there will be no incentive to remain in business or to start a business. It may not be viable to remain in business and with reducing numbers of advisers consumer interests are no longer best served and there are fewer advisers left to pay the ever-increasing regulatory fees and levies.

By the way, here’s a history lesson for those with shorter ‘time served’.  There was a maximum commission agreement (MCA) in financial services before polarisation was introduced in 1988 as part of the Financial Services Act 1986. This totally eliminated commission bias and meant that mass-market advice was available for all, even those that preferred not to pay fees.

However, the MCA was later considered to be a constraint, anti-competitive in fact by the Office of Fair Trading and was banned as it fell foul of competition law.

You couldn’t make it up!

FCA, asleep at the wheel or just showing off

Will the removal of trail commission have a negative effect upon your business?

If our current snap shot poll is correct, as at 10.30pm on 8th October 93% of the hundreds that have responded say it will be catastrophic.

This poll has not seen much publicity yet.

Logic must tell anyone with any degree of intelligence that whatever the rights and wrongs of removal are, the destruction by retrospection of a huge chunk of intermediated distribution revenue and value is neither right, fair or reasonable.

 And if this is the outcome, it is not good for consumers either.

How will it affect your business, will it destroy your business? Is the FCA aware, are politicians aware, do they care?

The poll link is here, let us know and see for yourself you’re your peers are saying.

Only yesterday we hear FCA chairman John Griffith-Jones saying ” “Yes, there may be side effects or unintended consequences and over the coming months we at the FCA will monitor developments in the market extremely closely. In particular we are alert to the advice gap issue and actually very interested to see where you, as part of a very competitive market place, go for new solutions that might meet the advice gap customer needs.”
Many of the unintended consequences (and this is one of them) as Griffith-Jones put’s it, were quite avoidable and were in many cases forewarned consequences. Now would be a good time for some meaningful listening and learning on the part of the regulator to avoid, not an advice gap, but an advice chasm.

As with almost every significant well intended aspect of UK regulation over the years, this may well prove to be an avoidable catastrophe from start to finish, with nobody left to man the lifeboats in the dash for the safety of shore.

Hopefully, I am wrong and somebody on the bridge at Canary Wharf will be able to turn hard a’port before the rocks are hit?