In November 2017, the now ‘late’ Professor Stephen Hawking issued a chilling warning about the imminent rise of artificial intelligence. During the interview, Professor Hawking warned that AI will soon reach a level where it will be a ‘new form of life that will outperform humans.’

There is a move afoot to bring the delivery of financial advice into the 21st century. After all, with the smart phone, tablet and virtual reality all breaking through boundaries, why should financial advice not find itself in the vanguard of change?

It should work, could work, but will not work until something very simple yet clearly requiring a considerable volte-face takes place.

So, here’s a thought for you lovers of Steve Jobs and even Ned Ludd.

I had a e mail today from Marin Software. It started with this statement: “Advertise Where Your Customers Are” and linked to an interesting article around Amazon advertising opportunities.

It observes: “When buyers search for a product, they’re increasingly turning to Amazon as their first stop. There’s no doubt that Amazon advertising is on the rise, but is it enough to loosen Google and Facebook’s iron grip on the digital advertising landscape”?

Steve Jobs reckoned that “Older people sit down and ask, ‘What is it?’ but the boy asks, ‘What can I do with it?”.

Smart technology exists and is readily available in the average home. Algorithm based analytics are there, right now, to deliver for the mass market an automated method of providing the average family with the ability to self medicate their financial ailments and prescribe a solution.

This happens in many areas of web based life today so why not financial services?

Robo-advice must be in the cross hairs for Amazon, they sell pretty much anything for anyone and are the masters of the Algorithm.

Amazon presents the world of financial services distribution with a challenge and an opportunity, at the moment a simple search for ‘Financial services’, life insurance, ‘pensions’ or any other search permutation offers up hundreds of books, but no access to actual advice.

How long until you will be able to simply say ‘Alexa, a pension/ annuity/ life cover’. And for Amazon, no warehouse space, packing or logistics of delivery.

Mr Bezos, over to you.

black amazon echo on table

Photo by Fabian Hurnaus on


Who needs Arnie when you have this lot

There is a radio advert I heard for an organisation called Money Redress. Their campaign focussed on the miss selling of SIPPS, the hot topic today, passing by PPI and with much higher rewards.

The firm is not alone, in BBC speak, other claims companies are available.

A typical pitch is:
Not aware how the money was going to be invested? 

 Pressurised into making an investment

 Not fully informed of the level of risk involved

 Your money was used for a high-risk venture without your understanding or agreement

 Told 100% of your money would be returned but lost you money!

 The investment was unsuitable for your needs

 Access to your money was limited when you were told you would have full access

 You might also have been misled over charges

 Promised investment returns that didn’t happen

There are a number worrying things about the advertising style used in this case, the strap line for starters is to text “WIN” to the firm.

The firm in question has a relationship with a regulated advisory firm and that in a way is part of the whole problem.

Sadly, it seems that there is often a connection between CMC’s and IFAs, something the FOS is quick to point out. In the above scenario the CMC will use the regulated aspects of their business interests to move a potential claim along.

Many CMCs either have a connection to a former financial adviser, or even a connection with an investment product and may have sold those products before!

I am aware of one former adviser, who having retained client records he should not have done, going back to the former employers’ client base to engineer claims for advice he had given.

However, using former connections is not the only way CMCs are able to find the right data.

Some CMC’s are making ‘Subject access requests (‘SARs’). These allow the requesting CMC to see the client data held by a data controller at an advisory firm. SARs are not a right to request documents, only the data itself, yet the CMC’s try to use these ‘SARs’ to request all documents held about a client.

Any CMCs presenting SARs as a legal right to get copies of documents in order to manufacture a claim should not be, indeed the courts are clear that an SAR is a right to data, not to documents. In January 2004 the Court of Appeal was clear in the case of Durrant v FSA,  that an SAR is not a replacement for pre-action disclosure.

I have also heard that some CMC’s are looking to buy the database asset of defunct firms from receivers who are winding up the firm. The value not being the trail commissions but the files to trawl for blame to lodge a claim with the FSCS.

Financial services compensation culture has led to the expectation that a complaint can be a lottery ticket, purchased by simply texting ‘WIN’, that with a little luck can reap huge reward, irrespective of any truth or merit. Our recent FOS survey, with 212 respondents, showed that 72% of those advisers responding had experienced false or manufactured claims with a view to obtaining compensation.

Complaint resolution should always be based on the evidence available and if not on the balance of probability, factoring in the advice given in relation to needs and aspirations of the client at the time of the advice, not a complaint re-engineered 10,15 or 25 years later.

An active firm can defend that position, a defunct firm cannot and so off it goes to the FSCS who would have no idea if the claim false or manufactured. The outcome, in regulatory speak, is that firms then see a call from the FSCS to pay the CMC’s fees. You could not make this up.

The financial services industry is littered with examples of self-harm and opportunism. This type of proxy opportunism does the fight to restore trust little good.

FOS treating IFAs as ‘guilty until proven innocent’

Did you believe the FOS help complainants create a complaint where none existed?

This was just one of 15 questions answered in the FOS survey we ran during June & July which received 212 responses. Many thanks to all of you who completed the survey and for the hundreds of really inciteful comments that really put some flesh on the answer bones. As with all our surveys, it is the comments that make for such interesting reading.

The final ‘score on the door’ for that question? 66% believe that the FOS help complainants create a compliant where none existed!

Very worrying indeed, but it is some comments added, beyond a simple yes or no that should really start ringing bells with the FOS. For this question some comments were:

  • Where they feel inclined they will stray from the complaint in order to favour the customer with a positive outcome even if it has not been the subject of a complaint.
  • There was a case where a client was making a complaint against a DB scheme, but when FOS realised the company concerned wasn’t on its register, the FOS employee suggested the client complain against us!! 
  • I believe that complainants are apt to add to their initial complaint when in conversation with the Ombudsman and I know that FOS will look at the wider picture if they feel it is reasonable to do so 
  • Yes, there is no doubt that the process is not to seek a resolution of the complaint made, but to ensure that there can be no suggestion that the FOS have not investigated any opportunity for a clients’ complaint to succeed. 
  • The FOS demonstrate the view that all complainants are innocent and honest and that the Industry is corrupt and incompetent. So, if they can dig into a complaint and find an alternative angle they will do it

Another question asked was: “Do you think FOS rules and process place an adviser or firm in a ‘guilty until you prove your innocence’ position from outset or have you generally found them to be fair?”

83% agreed, some comments are:

  • I have yet to see an initial complaint letter which does not make the adviser look guilty, otherwise there would be no complaint. It has to be, therefore, that the adjudicator is biased towards the complainant until the defence is provided. 
  • Absolutely. To the point that I have decided to stop investment advising in the next 12 months. I now consider the risks too high. All of the cases I have read, or been involved in, seem to work on that basis – “prove that you didn’t do it”
  • Our Judgement was based on the argument that the complainants view had to be more likely and not just as likely as our own. 
  • It is difficult to answer this however the rules mitigate against a ‘fair trial’ and in that respect there is an imbalance. As Walter Merricks famously stated to a Cardiff Conference in 2003, it is like a game of football where one side is playing uphill.

Worryingly, we also observed the following:

—  55% of respondents had no idea as to who the FOS is accountable to.

—  72% had experienced false or manufactured claims with a view to obtaining compensation

—  95% felt that the adviser should have the same rights as the complainant to appeal to the courts when unhappy with a decision rather than an than expensive judicial review

Full results will be shared with you soon, but in the meantime, a copy of the results has been sent to the Treasury Select Committee, the FOS and the FCA.

As yet we have had no responses apart than from the FCA thanking us for “sharing the findings of your latest FOS survey. It makes for interesting and occasionally provocative reading”.

The survey results have also been picked up by FT Adviser who were interested to know if the report findings were perceptional or based on actual experiences?

Our view is that although we cannot be 100% sure, either flags an issue. If perceptional then the FOS has work to do the change those perceptions. If they are actual, then work is required there too.

We hope, in regulatory speak, that ‘learnings’ will be taken from this to ensure that the original intent for any Ombudsman is to resolve complaints based upon the balance of probability and/ or any evidence that may be available.

We do not look to favour one side over the other, but looking at all of our FOS surveys from 2011 to 2018 there does appear to be a consistent  and ongoing view in the world of financial advisers that simply cannot be ignored.

To view full results click here

Read the article in FT Adviser

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.