In the business of crime there’s two people involved

Panacea comment for Financial Advisers and Paraplanners

13 Oct 2017

In the business of crime there’s two people involved

It was during this same month six years ago that I first read with some dismay, but an overall lack of surprise, that the then FSA had opted not to license or pre-approve financial services products, due to what it claimed were a “lack of resources”.

I’m sure I don’t have to remind anyone reading this that back in 2011 the consumer had already faced considerable detriment as a result of financial products such as PPI. And the regulator’s helpful response almost every time was to point out flaws in product design, marketing or understanding of the product – all with the benefit of hindsight.

Fast forward to 2017 and the same issues rumble on as a result of the regulator’s inaction to preapprove products before they are made available to consumers. Around this time last week, for example, the news broke that the FSCS had begun accepting claims for bad investment advice in relation to a failed property scheme Harlequin.

Anyone invested in Harlequin would have, at first, been deemed ineligible for FSCS compensation as the product would have been considered a direct investment. But the FSCS reviewed this position and found new evidence that the Harlequin products likely fall under the banner of unregulated collective investment schemes (UCIS), which qualifies them for FSCS protection. The FSCS is also already paying claims against firms for bad mortgage advise and pension switching, if the underlying investment was in a Harlequin resort.

If I’ve said this once I’ve said it a hundred times and I’ll keep doing so in the hope that one day the regulator will finally see the light: regulation should not be about being wise after the event. It should be about utilising experience when things going wrong to make sure mistakes and failures do not happen again. To licence a product as fit for purpose, with that purpose clearly defined, as part of the regulatory process is the surely best way of achieving this? I’d even go one step further to say it’s the single most effective consumer benefit a regulator could put in place.

The situation with Harlequin, and most other examples for that matter, are always about the advice and not the product. The FCA has been careful to point out that any adviser recommending Harlequin was expected to have carried out thorough due diligence on any Harlequin investments “to fully satisfy themselves that it is a suitable investment”.

In no way aim I suggesting due diligence isn’t a crucial part of the advice process but let’s consider a slightly different approach for a moment. If products were regulated from the outset, and advisers regulated by the FCA were not allowed to engage, at all, with unregulated products – commission paying or not – problems and losses such as this would not happen. And crucially, the tab would not have to be picked up by the FSCS.

I’ve been suspicious for a long time now that the FCA’s decision back in 2011 was really nothing to do with resource and instead was all about responsibility and, ultimately, who the finger points at when things go wrong. Sadly, this latest development in the Harlequin case only confirms my suspicions yet again. It seems that without something to bash the regulator would perhaps feel it has no purpose, or as Keith Richards of the Rolling Stone’s, not PFS, once said of the policing system, “in the business of crime there’s two people involved, and that’s the criminal and the cops. It’s in both their interests to keep crime a business, otherwise they’re both out of a job.”

Some have suggested that the resource needed by the FCA to pre-approve products would have resulted in a huge increase in fees. But then there’s the alternative, logical, argument that perhaps if products were licenced there would be fewer failures to fund? Just a thought…

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Buzzwords

Panacea comment for Financial Advisers and Paraplanners

20 Sep 2017

Buzzwords

buzzword is a word or phrase that becomes very popular for a period of time. Buzzwords often derive from technical terms yet often have much of the original technical meaning removed, being simply used to impress others. They started to appear in the 1960’s. 

‘Learnings’ is a buzzword, it has become very popular in the world of accountability, liability and in particular regulation.

There are some excellent examples of the use of this particular buzzword. It will often be found in sentence constructions from governmental organisations and official public bodies. For example, ‘there are key learnings to be had’, an ‘enquiry is needed to discover what learnings can be made’, or ‘we will apply these learnings immediately’.

The definition of what it implies and what the ‘outcome’, another buzzword meaning ‘the way a thing turns out; a consequence’,  are actually two different things.

We hear that word ‘learnings’ a lot at the moment. It can be heard in relation to regulation (as a catch all industry in its own right) law and order, healthcare, disasters, failures of …well anything in general really that involves collective responsibility or blame when the reality is that no person ever ends up being fingered for blame.

‘Learning’s’ and ‘outcomes’ are often linked to the word ‘vulnerable’, meaning to be exposed to the possibility of being attacked or harmed, either physically or emotionally creating a verbal triptych’.

So when you hear these three words in the same sentence (they often form part of a BBC interpretation rather than a factual report of a news event) give it a little thought and a wry smile.

Why?

Because ‘learnings’ never ever happen. If they did we would not hear the mantra being chanted every time something goes wrong, as a form of absolution, as in it is not my fault.

Outcomes should lead to a learning; again they never do for the same reason.

They do not even lead to an intervention, more of that word another time.

And the ‘vulnerable’ are a growing collective in society. The word is overused, miss-applied and has become meaningless as we have become anaesthatised by hearing it so much, the vulnerable’ of the world must now outnumber those that are not.

In the world of financial services regulation, not a day will pass without reading, seeing, hearing all these words, individually, in pairs or a full blown broadside of them.

And with such overuse, they have no meaning, no empathy, no humility and no sincerity any more. Next on the radar is ‘our thoughts and prayers go to’!

Most people forget the third part

Panacea comment for Financial Advisers and Paraplanners

20 Jun 2017

Most people forget the third part

We started the week with this statement from the Lloyds Banking Group on behalf of HBOS:

‘Our customers’ safety is of paramount importance to us’: 

‘We have a clear policy that if a customer says that they are considering taking their own life that we must take the statement seriously and take action to protect them. 

Whatever your view of Noel Edmunds and Mr. Blobby may be, I cannot think of any example in my forty plus years in the financial services industry where any bank has ever made such a statement.

It is made worse in my humble opinion because any organisation that makes such a statement, especially via a spokesman, never actually means it. They are so detached from the pain they have caused and in apologising for that, their words simply make matters worse.

Lloyds is not alone, in fact they are quite low down the scale of stock messages of faux regret and condolence.

This month has seen a positive 12 bore load from politicians in particular and if we look back over the year, they have been supported by fading celebs needing a publicity boost, trade unions, regulators various, civic leaders, minority interest groups, broadcasters (BBC) and others of the so called society ‘elites’.

Top phrases used to sound good but little else at the moment are, in no particular order:

  • “Our hearts/ minds/ sympathies go out those affected by this…(fill in the blank)”.

This is a hijacking of an equally irrelevant use of the words, originally used by the military to describe a counter-insurgency policy of various governments. Essentially focused on “community outreach” in times of good versus evil conflict, it is now used in reference to emotional and intellectual support or commitment by those in authority to assuage them from their own inactions that probably caused the very thing they are ‘reaching out to’ empathise with.

Why bother with this type of statement, after hearing it so many times this month alone, from so many, it is devalued to the point of having no meaning at all other than a useful intro line to demonstrate faux empathy that is just not genuinely there.

  • “Lessons will be learned”:

This is sometimes linked to the word “Learnings”. NATO has a great definition of this. “The purpose of a Lessons Learned procedure is to learn efficiently from experience and to provide validated justifications for amending the existing way of doing things, in order to improve performance, both during the course of an operation and for subsequent operations. This requires lessons to be meaningful and for them to be brought to the attention of the appropriate authority able and responsible for dealing with them. It also requires the chain of command to have a clear understanding of how to prioritise lessons and how to staff them.”

A perfectly clear definition, but the reality in UKplc today is that the statement made and the realities of it are travelling in polar opposite directions.

Lessons are never learned, never implemented and personal responsibility is never fully identified, defined or the guilty made accountable.

“I deeply regret”:

A very popular phrase in touchy, feely UKplc, it is a very useful phrase in the apologising person’s verbal arsenal because it doesn’t require you to admit you did anything wrong, at all, ever. In fact the use of this phrase would simply be another way of saying I really could not give a…SHoneT.

“Mistakes were made”:

For those who feel that “I deeply regret” is admitting just a little bit too much responsibility, they can ‘upgrade’ at no extra reputational cost to “mistakes were made.” This is the zenith level of non-apology, used at the very highest levels of government. Prime Ministers like Tony Blair, David Cameron and now Theresa May have used the words. These are seen as better than “I deeply regret” by not only leaving it open whether they are actually the culprits, but also existentially questioning whether there even is a mistake?

I saw a great definition of ‘sorry’ recently. It said that “Being genuinely sorry is actually remembering what the hell you did and having enough genuine regret to sincerely endeavour not to repeat the very thing you know has caused distress or even great hurt”.

The source went on to note,When someone’s on your back like Zorro to apologise to you, or for you to accept the apology, they don’t actually mean they’re sorry. 

What they really mean is :“Look, can you hurry the ‘f…’ up and accept my apology so I can stop feeling bad about it? You perceiving me as (wronging/hurting/abusing/whatever- insert again where appropriate) is terribly inconvenient and my ego doesn’t like the pinch of reality, so if you don’t mind, get a shuffle on, accept my apology and let’s move on so I can slam my palm down on the Reset Button.

It would be great if those making these vacuous public pronouncements could come up with an original, heartfelt message of their own, one that sums up how they genuinely feel and not statements recycled to simply sound good, boost their own fading profiles or to kill off a reputational firestorm.

Better still, just shut up.

We’ve got to start thinking beyond our guns- those days are closing’ fast

We’ve got to start thinking beyond our guns- those days are closing’ fast

When contemplating the future of the financial advice industry, I can’t help but be reminded of the late sixties movie The Wild Bunch. Set in 1913 Texas, the film follows an ageing gang of outlaws looking for one final score as the traditional American West disappears around them.

Substitute the slow motion, multi-angle view of the world in 1913 to that of 2017, where our industry practices are on the cusp of potentially drastic change that could create uncertain future. Virtual reality now prevails, technology is king and in our world the day of the robo- adviser is nigh. But while I wouldn’t want to compare today’s hard working advisers to the dramatic personalities of The Wild Bunch, there’s an undeniable parallel between these characters facing retirement and some troubling figures around the future of the financial advice sector.

 

The current age demographic of the industry, based on our community analysis above of some 18,000 is certainly veering toward the older generation. New entrants to the industry as at Q4 2016 were lower that Q4 2015*. To make matters worse the number of advisers de-authorising in the same periods exceeded those joining*.

It may not come as a surprise that the number of financial advice firms currently being set up in the UK is also falling, with just 334 businesses authorized by the FCA in 2016 according to an FCA Freedom of Information request. It’s not hard to see a link between these dwindling numbers and the lack of fresh business ideas that is often brought about by bringing young talent into an industry.

Barriers to new entrants can be many and varied. Cost is a primary factor, especially for those looking to start a new business. From June this year the new minimum capital resources requirement of £20,000 comes into force.

For most smaller, established, firms it will be based upon the greater of £20,000 or 5% of the previous years’ income. This is in effect dead money and based on the £20,000 minimum, new firms would need to have a minimum year one potential turnover approaching £400k to warrant the lock up of this money.

Fees for a new firm add up quickly, freeze the £20k then add in staff costs, office costs, professional fees, technology, marketing. Possibly followed by an FSCS call. And then comes the need to find a paying client.

If you are moving from an established firm it is highly likely that there will be contractual restrictions placed upon you regarding client ownership and possibly a geographical restriction along with a time based one.

Put bluntly, all of this means that those seeking to create a new business are betrayed by the sheer cost imposed upon the entrepreneur, the ambitious, the wealth builders of the future by regulation. Rather like The Wild Bunch gang, our industry could well be on the precipice of extinction altogether. Is it any wonder then that we’re struggling to attract younger generations to the financial advice sector?

* Statistics based on Equifax Touchstone analysis of our database and CF30 FCA data

88% of Advisers would not use an outsourced Paraplanner

Nearly nine out of ten advisers say they prefer to employ a full-time paraplanner as part of their in-house team instead of turning to an outsourced paraplanner, exclusive research from Panacea Adviser has revealed.

The survey of just under 90 advisers asked if advisers consider outsourced paraplanning an attractive option for their firm, to which 88% responded to the contrary that they currently favour having a paraplanner on board as a permanent member of their in-house team.

Less than 1% of advisers surveyed said they would consider outsourcing paraplanning in the future.

We believe that the Retail Distribution Review (RDR) expedited the already expanding nature of the Paraplanner’s role and made them a ‘must have’ resource for many smaller advice firms looking to maximise their earning potential.

Against this backdrop, we might have expected to see a sharp uptake in demand for both in-house and external resources, something which makes the lack of popularity surrounding outsourced paraplanners in our latest survey a somewhat surprising result. However, in our opinion, this does not suggest that outsourced paraplanners somehow have less to offer than their in-house counterparts, they just need to do more to shout about the time saving and other benefits that outsourcing can bring to adviser firms.”

INDUSTRY VIEWS ON PARAPLANNING

The research also gathered opinions of both paraplanners and advisers, highlighting some of the key challenges – and benefits – that using this type of external resource can bring for advice firms.

Nathan Fryer, Director of outsourced paraplanning firm, Plan Works, said:

“I can fully understand why advisers would be apprehensive about outsourcing work of this nature to a third party. In many ways if I were advising myself, and could afford it, I would most likely look to employ a full-time paraplanner too. After all, inviting a stranger into what is quite often an adviser’s “life work” can be bewildering. 

“It’s this that makes communication so key when it comes to outsourcing, explaining why many outsourced paraplanners actually offer a bedding in period for the two parties to get to know one another and identify how they can work together.

While it is also true that having someone in-house can assist with other tasks such as admin and marketing, paraplanners are actually becoming increasingly few and far between, which means that salaries are also being pushed higher and higher.” 

Morwenna Clarke, CFP from Portland Wealth Management, also commented:

“We actually have a successful outsourcing relationship with a paraplanner at present but, in the past, we have come across issues around data protection when outsourcing.

“It seems that some outsourced paraplanners contracts don’t cover the legal issues around protecting and storing customer data, which could potentially see the adviser breach certain European laws. Another issue that may deter some advisers from turning to an external paraplanner is the changing definition of what constitutes a ‘worker’ under UK law, which may make it difficult to work with an outsourced paraplanner.”

As with every element of your business, it is important to ensure when working with a third party that the proper data protection licences are in place and that advisers work closely with their outsourced paraplanners to identify secure ways of communicating and storing data. This should help overcome some concerns that advisers have around using outsourced paraplanners.

Panacea Adviser provides opportunities for advisers and outsourced paraplanners to connect via its Paraplanner Directory and at no cost.  Here, outsourced paraplanners are able to include business details and links to their own website – allowing them direct access to Panacea’s 19,000 strong community.

For more information on the Paraplanner directory please click here. 

Happy 30th birthday Big Bang

Regulatory comment for Financial Advisers and Paraplanners

26 Oct 2016

Happy 30th birthday Big Bang

It was the great Gordon Gekko who said, “Moral hazard is when they take your money and then are not responsible for what they do with it.”

With these words of wisdom, I felt it might be time to reflect upon the fact that 30 years ago, on 27 October 1986, the closeted clubby world of the City was subject to a positive tsunami of changes that today, for those of us old enough to remember it, was called the “Big Bang”.

I was working in the City at the time and the financial services world, as we knew it changed forever from that date. The late starts, long lunches, early finishes were no longer fashionable, everybody started dressing like Mr. Gekko, huge mobile phones were ‘hand borne’ not hand held, the colourful LIFFE boys would strut their stuff around the Royal Exchange between trades and generally life seemed to have a very particular and agreeable buzz.

Over the past 30 years what was once a rather staid gene pool of public school chums in pin stripes, a veritable gentleman’s club of friends and relatives, had morphed into a US-stylisation of business practices.

With it came the skyscrapers of Canary Wharf and the City all linked with the considerable diversity introduced by foreign banks as plus points, but, the downside was that it came with a certain killer instinct that would mean even your friends and colleagues were not guaranteed a particular benefit without a cost attaching.

But in the post big bang world, as Mr. Gekko would say, “if you need a friend, get a dog”.

Regulation and financial services have not always been easy bedfellows yet upon reflection the world did seem a nicer, gentler place in many ways in the years building up to that 1986 Big Bang.

Social media did not exist then. What led to Big Bang was that the London Stock Exchange was coming close to, if not actually being found out without the enhancements of Google searches.

The stock market was really an almost regulation free (when compared to today) cartel, fixing commissions and linking this with trading floor admission complexities that would do the Royal & Ancient some credit.

It was a posh, gentlemen’s club version of the old London markets of Smithfield or Billingsgate- but with manners.

We saw a closed shop for the benefit of brokers and stock-jobbers all safely contained in their pin striped, bowler-hatted bunker which in the coming brave new world of class and professional barrier deconstruction would not be seen as acceptable any more.

Margaret Thatcher had been in power for some 7 years and the Thatcher vision of wealth creation by way of the state selling the public something they already owned was underway.

She was warned pre big bang, that this vision would lead to a new culture of ‘unscrupulous practices in the City‘, according to a release of government papers in 2014.

Her Cabinet secretary Sir Robert Armstrong said that a ‘bubble’ was being created that would be pricked” and “that corners were being cut and money made in ways that are at least bordering on the unscrupulous”.

But despite the warning, we still “Told Sid” and the nation rode a gravy train of expectation with flotations of once staid mutual institutions like the Halifax and Abbey National building societies- yes, remember them?

The merchant banks were in gorge mode on these flotations. SG Warburg, Schroders, NM Rothschild, Samuel Montagu, Hill Samuel and Morgan Grenfell were there doing it “very large”.

US investment banks like Goldman Sachs and Salomon Brothers (remember them too?) were also keen on some action but leading up to Big Bang it was not too easy for them to get into the club.

But change was on its way, the days of fixed commissions and closed shops were being replaced by the need to be competitive.

The City was no longer a place for “Gentlemen and Players.”

It was becoming a world of young and thrusting ‘spiv’ market traders who had literally switched venue, being recruited from the perceived ‘low rent’ market environs of Petticoat Lane, Billingsgate, Smithfield and Covent Garden.

And those guys brought their trading skills and “Loadsamoney” culture to the previously hallowed ground of the City and the Stock Exchange.

But now they worked, shouting in trading ‘Pits” or shouting at banks of computer screens waiting for that big deal, greeting it with more shouting and of course the resulting huge bonus moment.

The big success story of Big Bang was Warburg’s swallowing up of Ackroyd and Smithers, Rowe & Pitman and Mullens & Co who in turn were swallowed whole by UBS, then UBS/Phillips & Drew/Swiss Bank empire.

In the feeding frenzy Barclays paid huge money indeed for Wedd, Durlacher and de Zoete and Bevan, Deutsche Bank ate up Morgan Grenfell, Midland Bank (who are they) bought W Greenwell and this then got digested by HSBC. Kleinwort Benson bought Grieveson Grant, and NM Rothschild, Smith Brothers.

And what of the “Gentlemen and Players”?

Well they all retired to their stockbroker belt houses and country estates swapping pin stripe for tweeds, having “trousered” some very serious money.

With this sea change we saw the disappearance of those traditional and cautious values, my word is my bond, trust, nods, winks and tips were all to be replaced by what is now seen in many quarters as a reckless abandon, using somebody else’s money to trade on your own account for the benefit of the Banks who employed you and more importantly yourself.

If it all went wrong, the bank carried the losses until, as we saw with the spectacular 2007 banking collapse, the taxpayer did if nobody else seemed interested.

So when the indigestion disappeared from this bout of Mr. Creosote like fiscal gluttony, was Big Bang a success, was big beautiful?

Sir Robert Armstrong had the correct vision and Gordon Gekko I think has proved to be the master philosopher. The banks, post big bang, did take our money and were not responsible for what they did with it.

The largest banking fine in history levied this year has shown only too clearly that for rogue traders, in Gekko speak, “there is a very big difference between rehabilitation and repentance” and as far as casino banking and regulation is concerned, there is some way to go on both counts.

This would never have happened in the world of ‘Gentlemen and Players’?

Just a thought.

 

Tattoos and the workplace

hirefireNow I do understand that as the generations roll on, standards and expectations in business do not always meet with what would have been deemed acceptable in my younger days, but after my recent meeting with my new business banking relationship manager, something appeared very wrong in the world of banking and possibly elsewhere.

Tattoos are not everyone’s ‘cup of tea’ and it is a sad fact that they can, in extreme cases, give an impression that may quite unfairly, not match with the individual’s actual personality, capability, lifestyle or knowledge.

Self-expression for ‘my generation’ by way of ‘inking’ was once strictly reserved for south sea islanders, bikers, teddy boys, the military and the criminal classes. Today it has found its way into the boardroom. Men and women equally seem to exercise some poor ‘placement judgment’ at the tattoo parlour as the nations low literacy skills present ‘inkers’ difficulties in getting the spelling right as the big new danger.

According to ACAS “About one in five British people are thought to have one, and they’re most popular among 30 to 39-year-olds, with more than a third admitting to being inked and one in ten people in the UK are thought to have a piercing somewhere other than their earlobe”.

They go on to note that according to a recent study this particular practice is “extremely popular among women aged 16 to 24, as almost a half (46 per cent) are alleged to have a non-earlobe piercing.”

Although the ‘blue collar’ world is loosening up, not all ‘white collar’ financial services firms, large and small across the UK are ready for studded and inked employees since it’s only recently that tattooing and piercing have become so very mainstream.

Indeed, most small businesses I have spoken with do not have an ‘inking and body art’ policy in place.

Dress down Friday has not yet been replaced by ‘ink up Monday’, or has it?

I am not sure what image anyone these days is looking for in a bank manager but I would suspect that putting Captain Mainwaring to one side, one would perhaps expect a sense of some form of ready for business etiquette by way of dress, a certain understated sense of business interest, professionalism and enthusiasm.

It may be that todays employers are so ‘hog tied’ by human rights and political correctness that staff who are in customer facing roles can turn up for work as if they were either off to the pub with their mates or have just come from the pub and have not had time to prepare themselves for what pays the salary.

My new banking relationship manager was around early thirties, he was scruffy and had an enormous dark blue ‘Polynesian style’ tattoo extending the length of his arm to below his wrist, what may be elsewhere was best not contemplating.

Putting aside any prejudices, is it so wrong to expect that even in today’s world of more casual business standards, anyone in a financial services customer-facing role representing their employer should at least look the part?

What message is conveyed to a firm’s customer by the sight of a heavily inked, pierced thirty something individual who is there supposedly to represent his corporate employer in dealing with your best business interests?

Tattoos are for life it would seem but are they for business life? Many large employers have policies that do not allow visible tattoos. Depending on the employer’s industry and the type of job, this may make sense.

Does your firm have any ‘inking’ policies in place? Have you experienced any negative customer or staff reaction relating to tattoos either as an employer or as an “inked employee’?

 

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