Go to immediately jail, do not pass go

Panacea comment for Financial Advisers & Paraplanners

7 Jan 2019

Go to immediately jail, do not pass go

On day two of 2019 yet another IFA has been jailed for fraud. Neil Bartlett, 53, of Delamere Road, Ainsdale, used £4.5m of his victims’ money to fund some of the usual, favoured by all fraudsters, indulgencies of foreign travel, top hotels, prostitutes, exotic cars, boats and gambling.

In this case, again, like so many others, it involved investing other people’s money, pensions and often life savings into what they thought was a safe investment account with interest.

By safe, that means it is being paid to the advisory firm to disperse according to the advice plan. But in a not uncommon twist, Bartlett had created a sole trader account with the same name as the company he worked for and paid himself the money.

It is clear that in just about every case of fraud it involves client money being paid to a client account for onward distribution. Ninety-nine times out of one hundred all goes as intended but it is the one time that results in what we see again and again in client money fraud.

Readers may wish to Google search (other search engines are available- in BBC speak) fraud IFA 2018 where the scale of this fiscal disembowelling can be viewed. It is in millions and guess how it is dealt with?

This type of fraud is called, in legal vernacular a ’Serious large-scale confidence fraud’. A common factor is the targeting of known to be vulnerable victims. Also, they will often be multiple frauds, i.e. many victims are deceived in the same way.

As an example, this accusation could be levelled at the victims of the British Steel pension fund debacle.

These offences are usually charged under the Fraud Act where the maximum sentence permitted by law is 10 years imprisonment.

For this adviser’s type of fraud, sentences of up to 7 years are common if the fraud is in excess of £500,000.

For the now ex IFA, the sentence will see early release for being a good ‘boy’.

I am not sure if the FSCS ever try to recover from the now ex IFAs or indeed if asset confiscation is possible to offset some of the redress, but one thing is for sure, no matter what regulation is put in place, what checks are made, the opportunity is still there for this practice to continue.

When I was a broker consultant in the early ‘80’s, some IFA firms, referred to then as brokers, had client accounts’ and operated something I recall as being broker bonds. A bit like a wrap or platform investment in a way but it was in house.

I cannot recall any frauds but there were regulatory concerns and also concern from my employer at the time that this holding of client money where the investment was in an inhouse designed and built vehicle could be subject to abuse.

So, role on and working lifetime and fraud opportunity continues in abundance. The cost to clients when the opportunity is exploited is massive, the cost to the compliant firms is huge too and of course unexpected when the FSCS come calling.

The time has come to put a stop to regulated firms holding client money when the intended destination is to a regulated providers funds, wraps, platforms. As an extra measure, despite all the good arguments put forward by IFAs, regulated firms should NOT be allowed to deal in unregulated activity or markets, this would relieve the burden on PI insurers, FCSC calls and IFA firms when a regulated advice firm advises upon unregulated products. Unregulated products are often just that for a reason.

The ability of consumers to execute instant electronic transfer of funds really renders holding client money an unnecessary and expensive temptation. To stop this would see PI and other regulatory costs reduce and go some way to restoring trust in an industry, sorry, profession, that has taken a battering and will continue to do so every time money ends up in the hands of someone or something it should not.

Just a thought.

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FCA suggests clear out of sales dinosaurs

Panacea comment for Financial Advisers and Paraplanners

29 Oct 2018

FCA suggests clear out of sales dinosaurs

FCA suggests clear out of sales dinosaurs

Arthur’s thought for the day: “You make contact with your customer. Understand their needs. And then flog them something they could well do without.”

I think this may be what one senior figure at the FCA’s perception of financial services sales ‘persons’ is?

David Blunt, head of conduct specialists at the Financial Conduct Authority, speaking at a recent City & Financial conference explained:“Where we want to get to is for firms to have a real sense of personal responsibility for all they do in financial services.

He then went on to say, “Are sales people who have risen to the top the right people to be leading today”? 

As a retired IFA and the founder of IFA community Panacea Adviser, I find his thought process deeply offensive. Is he suggesting that sales people are a sub class. Sounds a bit like the ‘Brexit remainer’ argument about leavers- that they were too stupid, too ignorant, racists, xenophobes……you get the drift.

His Linkedin profile shows him starting his career working for City solicitors Hogan Lovells going on the well-trodden path of articles through to a fully qualified solicitor.

I suspect that David Blunt has little knowledge beyond the walls of regulation and academia. After leaving Hogan Lovells in October 1998, his entire career has been spent in regulation of some sort. Firstly, with a couple of years at the Stock Exchange then from 2000 it has been climbing ever upwards at the FSA and then the FCA.

It was said that intelligence does not fit easily with common sense. The curse of the regulator.

We all agree that happy customers (positive outcomes is the phrase to use in 2018) are the key to any successful business.

But with a working life spent entirely in the world of regulation, I am deeply offended as is the fashion today, on the part of others too, that he should ask the question “ Are sales people who have risen to the top the right people to be leading today”? 

If his Linkedin profile is a yardstick, this is an individual who has no experience of what it takes to raise the money to start a business, especially a regulated business, grow a business, deal with all the troubles that can go with it or has any idea whatsoever about running a business. And amongst the hardest these days is a financial services business.

Sales are bad, sales-people are bad, regulators are good is the message spouting forth? Really?

Any business is built on the fact that it has something that somebody is prepared to pay for. Tangible, or in the world of financial services, intangible.

Any business requires somebody to sell the services, goods, or in the financial services world someone to ‘sell’ the ‘advice proposition’.

Nobody ever bought a financial services product. Historically they were ‘sold’ it, often by direct sales.

That is bad in 2018, it is now by advice.

Bad like the new ’snowflake’ thinking about Churchill, Cecil Rhodes, Bomber Harris or even this month ‘Prince Charming’. All have done bad things it seems. Disney’s ‘Prince Charming’ is probably top of the pile for kissing Snow White without permission.

Back in the day, the reward for the ‘sale’ was described as a commission, successful sales people made a lot of it, the unsuccessful ones fell by the wayside.

By the way, people saved then, paid into pensions, had life cover and did not see advice as something to pay for as it was already included within the sales process- excuse the simplicity, but life was simpler then.

Today, success in sales is not measured in terms of commission, it is now called something else. It is a metric referred to as fee income- based upon advice from a professional. That person being highly qualified with a ‘proposition’ to offer but, with a product invariably attached.  As an aside that will doubtless bring scorn waves raining down, in most cases the fee for the ‘propositions advice proposal’ is closely resembling what was previously known as commission.

A successful advisor is measured in fee income. But really it is still ‘sales’. After all, if an advisor can find no paying clients to give advice to, they fall into the same category as those back in the day, a failure.

Mr Blunt should note that in financial services provider firms there are huge numbers of people who rely on advisors promoting their advice solutions for their livelihoods.

He should also note that most financial advisors are small business owners, if they are sole traders or in partnership, they carry responsibility to the grave at the moment for their actions.

I think that is what is called ‘personal responsibility’.

In any business, the sales people are the driving force yet for some reason, sales in financial services is a dirty word.  Even Hogan Lovells require business getters, people who can get new clients that they can charge fees to.

There are some fantastic people in this industry, many have come from a sales background. I am not sure how many regulatory staff have made the transition to sales in a commercial environment.

Oh, there is one, Rory Percival.

David Blunt “must be on them stair rods” (as Arthur would say), he should be careful what he wishes for.

There may be some out there like me, looking back over the failings of the various regulators we have had- NASDM, FIMBRA, PIA, FSA, FCA, asking Mr Blunt what consumer detriment his actions and those whose actions he manages could be accused of causing. After all, with some 19 years of his working life being spent in Canary Wharf (plus the last couple of weeks in Stratford) and looking with the #metoo generation mindset, there must be something?

But silly me, as ‘Sir Hector’ once said, if you want a regulator to take responsibility for what they do, nobody would want to do the job.

Those in regulation are the one’s who have failed the consumer. They are always right after the event, never show foresight or a willingness to apply forward thinking to regulation.

They kill businesses with that lack of foresight burnished with cost.

It is the consumer who suffers by way of firms passing on those increased costs and charges incurred paying to keep them safe from the detriment the regulator ‘coulda/ shoulda’ spotted years ago.

The question I would ask is “Are people who have risen to the top of the regulatory world with no real-world commercial experience or business success, the right people to be leading regulators today”?  

FCA suggests clear out of sales dinosaurs

FCA suggests clear out of sales dinosaursArthur’s thought for the day: “You make contact with your customer. Understand their needs. And then flog them something they could well do without.”

I think this may be what one senior figure at the FCA’s perception of financial services sales ‘persons’ is?

David Blunt, head of conduct specialists at the Financial Conduct Authority, speaking at a recent City & Financial conference explained:“Where we want to get to is for firms to have a real sense of personal responsibility for all they do in financial services.

He then went on to say, “Are sales people who have risen to the top the right people to be leading today”? 

As a retired IFA and the founder of IFA community Panacea Adviser, I find his thought process deeply offensive. Is he suggesting that sales people are a sub class. Sounds a bit like the ‘Brexit remainer’ argument about leavers- that they were too stupid, too ignorant, racists, xenophobes……you get the drift.

His Linkedin profile shows him starting his career working for City solicitors Hogan Lovells going on the well-trodden path of articles through to a fully qualified solicitor.

I suspect that David Blunt has little knowledge beyond the walls of regulation and academia. After leaving Hogan Lovells in October 1998, his entire career has been spent in regulation of some sort. Firstly, with a couple of years at the Stock Exchange then from 2000 it has been climbing ever upwards at the FSA and then the FCA.

It was said that intelligence does not fit easily with common sense. The curse of the regulator.

We all agree that happy customers (positive outcomes is the phrase to use in 2018) are the key to any successful business.

But with a working life spent entirely in the world of regulation, I am deeply offended as is the fashion today, on the part of others too, that he should ask the question “ Are sales people who have risen to the top the right people to be leading today”? 

If his Linkedin profile is a yardstick, this is an individual who has no experience of what it takes to raise the money to start a business, especially a regulated business, grow a business, deal with all the troubles that can go with it or has any idea whatsoever about running a business. And amongst the hardest these days is a financial services business.

Sales are bad, sales-people are bad, regulators are good is the message spouting forth? Really?

Any business is built on the fact that it has something that somebody is prepared to pay for. Tangible, or in the world of financial services, intangible.

Any business requires somebody to sell the services, goods, or in the financial services world someone to ‘sell’ the ‘advice proposition’.

Nobody ever bought a financial services product. Historically they were ‘sold’ it, often by direct sales.

That is bad in 2018, it is now by advice.

Bad like the new ’snowflake’ thinking about Churchill, Cecil Rhodes, Bomber Harris or even this month ‘Prince Charming’. All have done bad things it seems. Disney’s ‘Prince Charming’ is probably top of the pile for kissing Snow White without permission.

Back in the day, the reward for the ‘sale’ was described as a commission, successful sales people made a lot of it, the unsuccessful ones fell by the wayside.

By the way, people saved then, paid into pensions, had life cover and did not see advice as something to pay for as it was already included within the sales process- excuse the simplicity, but life was simpler then.

Today, success in sales is not measured in terms of commission, it is now called something else. It is a metric referred to as fee income- based upon advice from a professional. That person being highly qualified with a ‘proposition’ to offer but, with a product invariably attached.  As an aside that will doubtless bring scorn waves raining down, in most cases the fee for the ‘propositions advice proposal’ is closely resembling what was previously known as commission.

A successful advisor is measured in fee income. But really it is still ‘sales’. After all, if an advisor can find no paying clients to give advice to, they fall into the same category as those back in the day, a failure.

Mr Blunt should note that in financial services provider firms there are huge numbers of people who rely on advisors promoting their advice solutions for their livelihoods.

He should also note that most financial advisors are small business owners, if they are sole traders or in partnership, they carry responsibility to the grave at the moment for their actions.

I think that is what is called ‘personal responsibility’.

In any business, the sales people are the driving force yet for some reason, sales in financial services is a dirty word.  Even Hogan Lovells require business getters, people who can get new clients that they can charge fees to.

There are some fantastic people in this industry, many have come from a sales background. I am not sure how many regulatory staff have made the transition to sales in a commercial environment.

Oh, there is one, Rory Percival.

David Blunt “must be on them stair rods” (as Arthur would say), he should be careful what he wishes for.

There may be some out there like me, looking back over the failings of the various regulators we have had- NASDM, FIMBRA, PIA, FSA, FCA, asking Mr Blunt what consumer detriment his actions and those whose actions he manages could be accused of causing. After all, with some 19 years of his working life being spent in Canary Wharf (plus the last couple of weeks in Stratford) and looking with the #metoo generation mindset, there must be something?

But silly me, as ‘Sir Hector’ once said, if you want a regulator to take responsibility for what they do, nobody would want to do the job.

Those in regulation are the one’s who have failed the consumer. They are always right after the event, never show foresight or a willingness to apply forward thinking to regulation.

They kill businesses with that lack of foresight burnished with cost.

It is the consumer who suffers by way of firms passing on those increased costs and charges incurred paying to keep them safe from the detriment the regulator ‘coulda/ shoulda’ spotted years ago.

The question I would ask is “Are people who have risen to the top of the regulatory world with no real-world commercial experience or business success, the right people to be leading regulators today”?  

*The brilliant actor who played Arthur Daly was George Edward Cole, who died aged 90 on the 6thAugust 2015

Trains, planes and?

Trains, planes and?

Have phones at work become the new smoking in the workplace?

A walk into any office, anywhere in the UK, will make clear that attention to the job in the workplace during working hours is being jeopardised by the use of mobile phones.

Mobiles are everywhere today, you cannot escape them. In the office, on the train, in the street, the office, the plane, the underground, cinema, restaurants, theatre, gym, spa, saunas- all areas I have experience of although I may have forgotten some.

Even the delivery room is not out of bounds. Constance Hall, in our image, has snapped back at ‘mummy shamers’, who said that it was ‘poor parenting’ for her to be on her phone!

The streets are being walked by individuals in a zombie like trance, gazing in thrall at screen content- a book, an e mail, a movie. Even mothers with babies in prams and pushchairs are not exempt. And in some cases, sadly, death has followed.

A recent RAC Report on Motoring revealed a significant increase in the number of drivers admitting to using a mobile phone at the wheel. According to the report, between 2014 and 2016 this figure has risen from 8% to 31%. Regardless of the reason, any distraction behind the wheel can lead to accidents, severe injuries and car write offs.

In January this year, the Trump White House issued a new ruling banning the use of personal cellular devices in the West Wing, citing security concerns

From what I see on my way to meetings around the country, mobile dependency is so bad that the use of phones is almost the equivalent corporate time waste of office smokers who regularly decamp for a puff at the expense of their non-smoking co-workers although I guess some multi-tasking with Phone and fag could occur.

I would be the first to declare that I have an iPhone and iPad, but I yearn for some quiet time both in and out of the office.

Train journeys are a nightmare, even in so-called quiet carriages. You are never more than a seat away from some idiot shouting down a phone. Along with their loud summaries of the most important business deal ever done by anyone, anywhere, anytime, conversations also contain stock phrases like ’I am on the train’, ‘Sorry, I just went through a tunnel’, must be a dead spot’, ‘can you e mail me that’, ‘sorry can you say that again’.

The conversations often contain corporate buzz phrases like:

At the end of the day, Sophie will take the lead on this, Colin will be having a 360,Ecosystem, Better run this with the scrum master, start building consensus, We’re working in silos here…….I could go on, perhaps you may wish to add some that irritate below?

“Distracted walking” incidents, according to the National Safety Council “are on the rise, and everyone with a cell phone is at risk. According to a Governors Highway Safety Association report, there were nearly 6,000 pedestrian fatalities in 2017. This number mirrors 2016 fatalities”.

We are losing focus on our surroundings and putting our safety – and the safety of others – at risk.

The solution: Think about your surroundings and those around you. Stop using phones while driving, walking, in the gym, spa, getting off trains, buses and planes, on crossings too. Amazingly over half of so called distracted walking injuries occur in our own homes, proving that we need to stay aware of our surroundings, whether they’re new or familiar.

We have all sorts of ‘cause’ days, weeks or months in the UK today, the time has come to have a ‘cause’ month for not using a mobile device for calls, texts and e mailing in ALL public places?

The Three Certainties of Human Life are Death, Taxes, and more regulation

The Three Certainties of Human Life are Death, Taxes, and more regulation

“The regulator has found concerns over value for money in drawdown, including significant variance in charges, which can be complex, opaque or tough to compare, so has set out plans to force firms to show a one-year charge figure in pounds and pence in the key features illustration they provide to consumers”.

It is a commercial world out there and I can think of no other industry that has a regulatory insistence that charges for what they make/ build/ sell have to be granularly declared.

When you buy a new house, is there a breakdown of building and material costs supplied with the contract? The same with a new car: design.testing, parts and labour. A prescription drug does not come with a breakdown per tablet for research, development and testing, a holiday cost does not breakdowns for flights, hotels, food, drink or flight. Supermarkets do not declare what the business costs are for selling you a pack of sausages.

A bit simplistic I know but if regulation stops messing with fixing what in many cases is not broken and more people use a financial adviser, the world of independent advice and consumer trust may be a better place.

As an owner in the 1970’s of a waterbed (with the attendant life affirming fond memories) the illustrative metaphor of the movement in a water-filled mattress seems to be a common sense albeit simplistic description supported by a little known mathematical formula called Bode’s Sensitivity Integral.

Bode’s waterbed theory ‘outcome’ is already well illustrated in the mobile phone and utilities industries where regulation and political interference fixes or manipulates the prices of basic products and services only for consumers to see complicated pricing structures ensue by way of significant increases in the price of peripherals and additional services as a direct consequence.

Thiseffect is a phenomenon that should increasingly cause concern to those who regulate the industry and those it regulates in regard to pricing and the detriment the post RDR world has wrought upon the intended beneficiary- the consumer.

It is the natural but not necessarily intended potential to squeeze one part of a complicated and complex regulated business model (and the attendant regulatory processes) to cause a serious bulge elsewhere in the process.

So, the theorising in RDR should have foreseen that in achieving:

  • the elimination of bias in the market
  • ensuring the adviser is the true agent of the consumer
  • clarity over the costs of advice
  • and various other factors,

the industry would no doubt see the bulge appear somewhere else.

And this has been seen in costs in every conceivable way and particularly for consumers.

Cost is something that FCA regulation incurs for firms, often with little thought of logic or affordability and with little benefit analysis being done on the consumer impact and detriment it created.

So how else did the theory manifest itself?

In ensuring the adviser is the true agent of the consumer, the result was that the mass-market consumer did not, does not want to pay for advice that had previously been seen as free.

When a consumer is able to obtain lower prices from an adviser or a provider for drawdown, is it possible that other consumers will have to pay more for the same input from another adviser or provider firm as a result?

Is this bad for consumers?

The asymmetric exercise of regulatory or consumer power can lead to consumer detriment through raising other consumers’ advice and provider charges- the Waterbed effect.

While a large and powerful provider firm or distribution channel improves its own terms by exercising its market power in getting cost reductions, the terms of its lesser resourced competitors can deteriorate sufficiently so as ultimately to increase the average price of advice – the Waterbed effect.

It seems to me that the only organisations in the world of financial services that should raise serious “concerns over value for money, including significant variance in charges, which can be complex, opaque or tough to compare” are the FCA, FOS and the FSCS. 

We never see a breakdown of costs, budget breakdowns yes but costs????

IFA Antony Cousins at SPF rightly comments that “value for money has always been important to clients, however with returns from financial products expected to be lower over in the short to medium term, the level of charges are now even more relevant.  For many years Financial Advisers Fee Agreements have had to specify the exact service(s) being provided and the associated initial and ongoing cost in pounds and pence, hence I see no reason why providers illustrations for drawdown should not follow this model”.

He goes on to note that this should be“coupled with an educational programme to enhance customers understanding of a highly technical area would remove some of the scepticism in the industry”. 

There is some suspicion that the FCA are more concerned about clients going direct to providers in this drawdown market and not taking advice where we have to stipulate and review all these costs.

Regulation has created a race for the bottom on price. I am not sure that the average consumer ‘buys’ financial advice on the cheapest cost. I think that for the mass market consumer it could be about not paying anything at all as they see the pension plans providers they have been invested in for years should provide that advice for free.

This is in turn a problem for providers who are predominantly distributing their products via the intermediated channel. They do not want to carry out work, with added customer care regulatory liabilities or redress, that they see, is an IFAs role. But if the client has either been disenfranchised by RDR segmentation or just does want to pay what else can be done.

Waterbed effect at work again????

Is it all still ‘Pete Tong’ at the FOS in 2018?

Since 2011 we have been conducting research via a simple survey to gauge what advisers think about service levels and standards delivered by the FOS, in particular looking at their processes and the fairness of the system.

The first survey ran in 2011, then 2014 and finally, our last was in 2016, with the same questions.

A particularly disturbing trend was the increase of firms who had experienced false or manufactured accusations from complainants in an attempt to gain compensation, which went up from an already large 64% in 2011 to 74% in 2014.  

2016 continued to show a consistent negativity of experience.

So, what does 2018 look like?

Another two years have passed, and we want to know, will 2018 see any improvement on the:

  • 71% of advisers that felt FOS adjudications are unfair?
  • 69% of advisers that felt adjudicators help create complaints where no complaint existed?
  • 85% of advisers that felt FOS rules place an adviser or firm in a ‘guilty until proven innocent’ position from outset?

FOS Review

Channel 4 ‘Dispatches’ itself tackled the FOS earlier this year, painting a rather bleak picture of operations. As a result of the programme, FOS Boss Caroline Wayman has launched a review so it could “better understand and address the concerns” raised by Dispatches. This will be reported to Parliament shortly before summer recess.

Hopefully our survey, which will be shared with the FOS and Nicky Morgan (Chair of the TSC), will prove timely, and for Ms. Wayman provide a view of the FOS from an adviser perspective. And the industry itself can ponder if things have got better or not since 2011, 2014 and 2016.

Please complete the anonymous, 5-minute survey below and share it with your colleagues.

Your input is important, vital and greatly appreciated.

Will GDPR destroy businesses?

Will GDPR destroy businesses?

The date is upon us.

GDPR was a cunning plan thought up by the EU. Europe’s data protection laws have long been regarded as a gold standard all over the world. But over the last 25 years, technology has transformed our lives in ways nobody could have imagined so a review of the rules was needed.

In 2016, the EU adopted the General Data Protection Regulation (GDPR), one of its greatest achievements, they say. It replaces the1995 Data Protection Directive which was adopted at a time when the internet was in its infancy.

The GDPR will be recognised as law across all the EU member states today, the 25thMay 2018.

But will it actually see the destruction of many businesses. Mailing lists and research data built up over years may be rendered useless if those businesses do not have consent to keep in touch or hold that data?

Companies are worried about the impact non-compliance could have, many fear that negative media or social coverage could cause their organisation to lose customers and they are very concerned that their brand image, built up over very many years, would be de-valued as a result of negative coverage.

Although this is an EU directive, it also affects businesses globally who interact with European customers seeing some applying blocks for their customers in the UK and Europe. American news websites including the New York Daily News and Los Angeles Times are among those which have temporarily shut down in Europe along with many others who sell goods online to the UK & Europe.

The privacy of the individual is hugely important, especially when set against the intrusions of governments. GDPR is potentially putting the brakes on innovation and risks punishing companies for situations beyond their control.

There are some ironies too. The EU wants to give individuals unfettered access to the data that companies store about them. Yet the EU is not transparent about its own operations, including the voting records of MEPs and the lobbyists who try and shape EU policy in their favour.

GDPR takes little notice of how data is a vital raw material of product and business innovation. It is likely to stifle data-driven innovation as well as helping to reduce operational costs.

Rather like a lot of regulation in the UK, learnings only come when it is way too late. In this case let us hope that businesses, especially smaller businesses can survive the impact of GDPR, both seen and unforeseen.

As a footnote, this is the most perfect opportunity for scammers to use GDPR as a way of getting you to click on a link in a phishing e-mail that you shoud not. DO NOT click on any e mails where you do not recognise the sender or the address it purports to come from.