How much is that doggie in the window?

So, three in four firms failed to provide the required information on the cost of advice.

There has been much focus on the restoration of trust in financial services and it would not be unreasonable to assume that clarity on the “how much” bit could be seen as a cornerstone. The FCA is looking at how this is explained or quantified by advisers. The advisers may be looking at it from a client querying perspective as in explaining  “how much” and why!!!!!!?????

FCA research around clarity over advice has really caused a stir with firms failing to give clients clear, upfront, generic cost information  give clients clear confirmation on how much advice would cost or give additional information on charges and that they may fluctuate.

Additionally, a third of firms offering a restricted advice model were being unclear about the restriction and for what. service were not being clear they were restricted, or indeed the nature of the restriction, and a third failed to give clear explanations of fees for  ongoing service as well as their rights to cancel.

Clive Gordon, who we met with in March and is FCA Head of Investment advisers and platforms said: ‘the findings demonstrate a lack of engagement by the majority of firms. In the July [2013] document we put out good and bad practice because we have done research on industry engagement and the industry likes that. We also distilled down the key messages in a two-page factsheet.

‘We have been engaging with the industry but I think the results we are publishing today just how that the vast majority of firms have failed to engage with that.’

I think that what we found out at our FCA recent meeting is that advisers see ‘regulation speak’ as something that is directed at them rather that toward them. On the regulator’s side, they see that the issuing of a document riddled with regu-speak is sufficient to have made everything very clear indeed.

If this is a failure of either side or both it needs to be addressed. But is there a deeper-seated problem, in Churchillian speak, a version of “”two nations divided by a common language“?

In this case the mighty USA being represented by the FCA (what a thought) and the advisory community being Britain?

As Lee Werral, the Compliance Doctor at Compliance Conslutants observed:“Advisers have had 25 years of regulation and point of sale disclosure and still cannot seem to understand that you have to declare what you are going to charge and why, and what the ongoing charges are and why.

Many still use the excuse that they don’t know what size of assets/funds etc that the client holds – so my question is, why are you discussing prices without having a conceptual agreement in the first place? Surely the initial (free) interview is to establish this, but IFAs seem to, as they want to “compete on price alone” still want to compare themselves against others in the area. 

Most professional salesman understand that you need to get a conceptual agreement from the client, a full understanding of their goals and aspirations etc before you can provide a true cost – one which adds value to the client.

Yes, a menu of charges is a good idea (typical costs) but this can be sensibly constructed without committing the adviser to any specific combination until the fundamental needs have been established. If advisers want to advertise themselves like a Kebab Shop and fail to constructively inform the clients what the charges are and why the charge is being applied, or what they will get out of it, then they deserve to be referred to enforcement.

Part of the problem is that many advisers still see that they have to get their 3%/5% or whatever from pre-RDR days into a post RDR fee. Frankly, the world has moved on. Yes, you can quote me on any of that.”

A year ago we highlighted concerns that regulation regarding the various FCA diktats and tomes reckoning that they would benefit from being put intoplain English. 

Here is a great example of FCA ‘clarity speak’ “Behavioral biases can render regulatory interventions aimed at addressing information asymmetries harmful”. And that means?????

On Clive’s own admission, perhaps they need to look more closely at how they communicate and on what frequency. If that was better and structured in such a way to influence “understandings of the common man’, we may see a dramatic reversal in this disturbing trend.

As a point of interest, there are many financial organisations who have beenawarded the Crystal Mark by the Plain English campaign.

The FCA does not seem to be on the list, that may be a good point for them to start their ‘clarification works’.


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