Brexit conspiracy theory, they thought it was all over. It is now.

Panacea comment for advisers and Paraplanners

13 Jun 2017

Brexit conspiracy theory, they thought it was all over. It is now.

Winston Churchill said, “The best argument against democracy is a five-minute conversation with the average voter.”

I have been reading a very interesting book by Sunday Times journalist Michael Hume called ‘Revolting. It is a tome exploring in some detail how the establishment elites are or might be seen to be undermining democracy.

Now I am not a big fan of conspiracy theories but I had a bit of a “Damascene conversion” today and I will share my thoughts with you.

Brexit is the new ‘Gunpowder, Treason and Plot’. It is Cavaliers and Roundheads. It is Braveheart. It has divided the nation and it is about to get worse. In fact so much so that it may end in civil unrest with the electorate ‘revolting’.

Here goes my very simple conspiracy theory.

The referendum produced a result that the establishment neither expected nor wanted. A bit like the Trump Presidency or even the resurgence of the Labour party in the last weeks of the election, depending on your political leanings of course.

When the Brexit result was declared, instead of triggering Brexit the very next day as he said he would, David Cameron resigned, buying the elites some time.

And with that the establishment wheels started to turn to ensure that the right outcome of that referendum would eventually prevail. Behind closed doors those elites that control so called democratic UK set in train a series of actions to ensure that outcome prevailed.

It would take a year or two but….hey ho, wheels with a precise function move slowly.

Establishment wheel 1: The conservative party needed a new leader. Strangely, after some very convoluted, overt Machiavellian machinations, Boris was sidelined (knifed) by Michael Gove, Theresa May won the contest on 11 July 2016, after the constructive withdrawal of the only other candidate, Andrea Leadsom, left her as the sole candidate without any vote needing to take place.

This ensured that a PM was in place who was a remain voter. She did not trigger the Brexit process either, feeling it best for the nation that a delay happened giving those elites time to start making some carefully calculated mischief. And that is what they did.

Court cases, more court cases, EU threats were all the hazards being put in the way to try and get some momentum to make the country think again, vote again- like Ireland (until they got the vote the establishment elites and the EU wanted).

None of this worked and in order to ensure that some clear blue water was put in view to keep the Brexiteers happy, on the 29th May 2017, Theresa May formally wrote to Donald Tusk announcing the intention of the UK to leave the EU.

Establishment wheel 2; The Brexiteers were now happy but there appeared to be no strategy declared to deal with the negotiations. Many said this was because there was no strategy.

That could be because the end game here is that Brexit as wished for by the majority Brexiteers was never going to be allowed to happen. To ensure that outcome a very cunning plan indeed needed to be put in place.

It would cost politically but that did not matter. It is/ was about country, about the elites who control UKplc and certainly not about the people or indeed politicians.

Establishment wheel 3: Theresa May, in thrall, possibly hock to the Remain elites had to take some desperate measures. She claimed that an election was needed to boost her majority to ensure the ‘right outcome’ for UK plc prevailed, giving her negotiating strength in Brussels.

The right outcome for the Brexiteers was so called ‘hard Brexit’. The right outcome for the elites was a soft Brexit or perhaps no Brexit at all.

Establishment wheel 4: The problem with boosting the majority was that this was the very last thing the elites needed. The polls were suggesting a triple digit majority that surely would see ‘hard Brexit’ the result.

But the elites cunning plan was on track, instead of setting the election date to fit with the local elections- the most obvious option for a so called ‘snap’ election, the date was rolled back several weeks to allow campaigning to take place.

Something that would definitely muddy those clear blue waters.

Establishment wheel 5: With waters muddied, Tiny Tim went to work on the Brexiteers, to little effect. The Conservative lead was still looking impressive and Brexit on track. Manifesto time for the elites was the ‘nuclear’ option’ and the button was pushed.

Establishment wheel 6: The so-called leaked Labour manifesto started the wobble the élites needed, more state spending on the NHS, infrastructure, free university education, nationalising the railways and utilities but it was still not enough. What was needed to ensure true chaos and a Brexit sanity sabotage was something almost unthinkable.

Establishment wheel 7: With a Conservative majority still looking at upper two figures the final act was played out. The core Conservative vote is the old. They actually go out and vote.

They have worked hard for a lifetime, paid into the system, gone through wars, plague, famine, pestilence, recessions and even a number of Labour governments are still live in their thoughts. All those strikes, union power, three-day working weeks. They would never vote for Corbin.

Establishment wheel 8: How do you stop that mindset? Simples. You produce your manifesto last and in it you lay the ground to take away all your entire core vote that as a party have strived to retain.

To add a bit of toxicity to ensure more Labour votes you propose to end the fox-hunting ban, refuse to rule out tax increases and bring back Grammar schools.

The result? Job done, electoral chaos, a country fed up with elections, a Prime Minister who has no power without DUP support and what’s more cannot resign without risking yet another election that Corbin might actually win.

Not quite the ‘Up yours Delors’ result for the Brexiteers anymore.

Michael Gove was on record as saying “I think there’s a grassroots feeling of being betrayed by the elites in some way: that the system is working for itself and not for the people at the bottom”.

He was right, but it has escalated further up the system now.

Just a thought, after all, what do I know?

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Politicians and Pyrrhic victories

Panacea Comment for Financial Advisers and Paraplanners

12 Jun 2017

Politicians and Pyrrhic victories

As the dust settles on the political mess that surrounds us, I, like you no doubt, have been reflecting on what ‘learnings’ (that wonderful word that those who should be responsible trot out when they have messed up) have been coming out, a little before Thursday and now in the swirling dust cloud of verbal spin, catch phrases, excuses, retributions, pollsters and egos.

My own MP, a junior minister at the Ministry of Justice, visited me last week and expressed his concern that the Tory party had gone ‘off piste’ into danger.

In skiing parlance this was because the small group of skiers had no guide, had not listened to a weather forecast and had no piste map with them or even an avalanche safety device.

I tend not to be too political. This is because I have met a few MPs over the years, some on the TSC, some who were not. I have been amazed at their arrogance, general stupidity and lack of any knowledge of real life.

The nation today should be, in Hector Sants speak, ‘very afraid’.

Why?

Because it now comes to light that the government, since Brexit, has in effect been run by two unelected individuals. They have excluded many senior ministers and MPs from the formulation of policy, a campaign strategy and manifesto.

That is bad enough.

What is worse is what we find out now.

Not only do we have an idiot as PM, we have a bunch of spineless ministers who sat there and said absolutely nothing. Not even a whimper of discontent, in effect offering up a ‘Nurnberg defence (we were only acting on orders) in fear of their jobs in the next government that was expected to have a hundred plus majority.

And even worse, the post election complete lack of contrition. Today from Michael Fallon on the Andrew Marr Show, making possibly the best Uriah Heep impersonation I have ever see by a politician.

Readers of Charles Dickens will know that the character is notable for his cloying humility, obsequiousness, and insincerity, making frequent references to his own “‘umbleness”.

And this lot want to form a government to see the nation through the Brexit process?

Once again I am reminded of Bob Monkhouse’s quote about his career aspirations. He said, “everybody laughed when I said I wanted to be a comedian. They’re not laughing now”.

In this case think of Mrs May. Nobody laughed when she called an election that was not needed. Well, they’re all laughing now.

God save the Queen.

How much has the shiny new logo cost this time?

Panacea comment for Financial Advisers and Paraplanners

9 May 2017

How much has the shiny new logo cost this time?

In 2013, a Panacea FOI request exposed the rebrand cost for the FSA’s change to the FCA.

It was  £1,061,423 including VAT.

The FOI request went on to confirm the cost of the logo design saying:

“We have spent £48,000 on designing the FCA brand identity, £91,500 on developing the FCA brand guidelines, £57,000 on registering the new logo and on legal fees to resolve registration issues”.

So when we heard that the FCA had decided, after a shelf life of barely three years, to change it’s logo, we though it would be an idea to find out how much?

In their reply, an unnamed individual from the “Information Disclosure Team / Cyber and Information Resilience Department” said We undertook a refresh of the FCA brand to make sure our brand is accessible, open and transparent so that all our audiences understand our role.  In particular, we need to ensure our brand works well for digital use and takes into account accessibility considerations.  This is particularly important as we are planning to launch our first national TV and outdoor advertising campaign on PPI later this year. Consumer research in particular has helped inform our evolution of the FCA logo to ensure ‘Financial Conduct Authority’ is clearly legible and accessible”.

Given that in 2013 so much was spent on rebrand one might ask, purely from a business owner perspective, why the lifespan of a ‘global’ brand is just 3 years? That would suggest that either the brand brief or interpretation was incorrect in 2013.

The reply to our request was answered as follows.

          “Brand refresh 

·         The design cost:

£5,340

·         Legal costs:

£1,440

·         Implementation cost;

£66,410 – we have interpreted this to be the total cost (including the items above) – agency work to audit FCA brand and update logo and design approach, design templates for new brand, effra fonts and logo trademark registration.

·        Stationery cost”

There are currently no stationery costs. As stated above, the existing logo will be phased out over the next year and we will not change signage in our printed material such as letterheads or business cards until either they run out or we change address. 

Over the last 10 years the Panacea brand logo is unchanged, as is the Ford Motor Company’s, Apple and Coca Cola. In 2014, the Coca-Cola brand name alone was worth $67million, accounting for more than 54% of the company’s stock market value at that time.

It is said, a strong, consistent brand will allow the customer to know exactly what to expect each time they encounter your business” 

Steve Jobs said, “Design is not just what it looks like and feels like. Design is how it works”.

In this case, the jury on the ‘how the FCA’s works’ is still out.

The cost of this exercise is quite small in regulatory terms. I am not sure what the effect is on consumers but I am sure that those it regulates will see this as another example of spending other peoples money without being responsible for how or if it works or in this case if you can notice the difference at all.

Can you spot the differences?

We had to destroy Ben Tre in order to save it

Panacea comment for Advisers and Paraplanners

24 Apr 2017

We had to destroy Ben Tre in order to save it

For those not old enough to know too much about the U.S. involvement in the 1960’s Vietnam war, and some of the madness surrounding it, this quote has gone down in history as an example of the some of the insanity that was Vietnam.

As with many examples of madness in what should be a sane world, this quote, which I was reminded of recently, is well worth considering alongside. It is Callum McCarthy’s six pillars of wisdom speech at Gleneagles in September 2006.

The so-called pillars on which RDR was to be founded were:


1.    an industry that engages with consumers in a way that delivers more clarity for them on products and services;

2.    a market which allows more consumers to have their needs and wants addressed;

3.    remuneration arrangements that allow competitive forces to work in favour of consumers;

4.    standards of professionalism that inspire consumer confidence and build trust;

5.    an industry where firms are sufficiently viable to deliver on their longer-term commitments and where they treat their customers fairly; 

6.    a regulatory framework that can support delivery of all of these aspirations and which does not inhibit future innovation where this benefits consumers. 

The Heath Report Two (THR2) had been created to examine the consumer detriment caused by the regulator’s actions in introducing the Retail Distribution Review.

The Heath Report Three (THR3) will be published toward the end of May.

As Garry said “It did not seek to be a learned academic document but to assemble in one place a clear description of what RDR has created and suggest lessons that might learnt”. 

In April 2014; the Panacea Team, Lee Travis, now at PFS and Garry Heath met the with the FCA which dismissed the survey of 1,752 advisers, representing over 50% of the direct authorised IFA firms, as “unimportant

At that April meeting, the FCA informed us that it would issue an internal review early in the autumn which we expected to be in praise of RDR.

In the end, the FCA commissioned European Consulting and Towers Watson to produce and issue two lacklustre reports, which were quietly released in the week before Christmas to a distracted media – hardly the action of a confident regulator.

These reports suggested that there was “no evidence of consumer benefit” leaving the FCA to opine that RDR’s “longer journey will benefit consumers”.

As Garry observed, this is reminiscent of Mr Micawber’s hope “that something will turn up”.

With the advisory community barely having the capacity to service some 10% of UK consumers financial planning needs and with the remaining 90% who do not want or cannot afford to pay for financial advice, we seem to be in a similar situation to the one described by Captain Miller’s, US Army Corps of Engineers  Commander, Task Force Builder, 1968  46th Engineer Battalion  159th Engineer Group ,recollection of Major Booris’s reasoning for destroying a whole village with so much firepower.

In the case of RDR only one of the six pillars stands, number 4. And as we all know you cannot build any sustainable structure on just one pillar. It just falls down. The regulator has ensured that the other five cannot be built as the ground beneath it has been destroyed by too much regulator firepower.

In the Vietnam movie ‘Apocalypse Now’, Captain Willard, played by Martin Sheen, asks a seasoned vet while riding a helicopter over enemy terrain “why do you guys sit on your helmets”?

The answer could be the same reason why IFAs only have a 10% capacity for advice?

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

Compliance and the Stupidity Paradox

Panacea comment for Financial Advisers and Paraplanners

13 Feb 2017

Compliance and the Stupidity Paradox

Compliance is an important part of the whole world of financial services and indeed many other worlds of business and governments.

In the world of financial services regulatory compliance “describes the goal that organisations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws, policies, and regulations.

The rules are well defined, as we all know, in the FCA handbook. For the avoidance of any doubt, the regulator has even provided an introductory guide.

Regulated firms must follow FCA rules. The rules it would seem are clear (to the author/s) but the interpretation and purpose of them at times makes little sense.

A book, published in 2016 by the City University of London called the ‘Stupidity Paradox’ investigated common sense in decision-making.

Professor André Spicer’s research included input from management consultancies, banks, engineering firms, pharmaceutical companies, universities and schools.

The ‘outcomes’ of investigations into the ‘Stupidity Paradox’ revealed many examples of when common sense decisions are simply ignored.

Examples included: 

  • “Executives who more interested in impressive power point shows than systematic analysis.
  • Companies ran leadership development initiatives which would not be out of place in a new age commune.
  • Technology firms that were more interested in keeping a positive tone than addressing real problems.
  • Marketing executives who were obsessed with branding when all that counted was the price.
  • Corporations that would throw millions into ‘change exercises’ and then, when they failed, do exactly the same thing again and again

I just love the last one.

Professor Spicer’s concludes by asking, “Why could such organisations, employing so many people with high IQs and impressive qualifications do so many stupid things”.

I am reminded of the definition of a camel. It being a horse designed by committee.

I have worked since the early 80’s in the industry thought six different regulators- NASDIM, LAUTRO, FIMBRA, PIA, FSA and FCA. The average lifespan of a regulatory body being some six years.

With the exception of the FSA transition, rulebooks, even staffing, for the predecessor bodies have been subject to rewrite and new hire, not a roll over. The FCA transition was a re-skin.

What does ring loud and clear is that regulators do not, in the most part, seem to learn from past mistakes. Not only are ‘learnings missing, they more often than not refuse to accept responsibility or blame for past mistakes.

The FCA is now approaching four years old. So, in theory only another two to three years to go until yet another metamorphosis occurs. In that time it has seen two chief executives and a significant turnover of very senior staff embarking on a journey working for the firms they used to regulate.

Regulation is an industry. The thousands of pages in the FCA manual require firms in turn to employ thousands of people with high IQs and impressive qualifications to interpret the rules and ensure that their business implements them to the letter.

FCA research from 2015 found that 88% of large firms and 44% of small firms increased the amount of time and money they spent on compliance and the cost of regulation, according to New City Agenda is some  £1.2 billion.

But, and here is the big BUT. The finer interpretation of some rules would suggest that rather like in the Italian Highway Code, red lights are a suggestion, some rules make no sense in their implication.

We would love to know what examples you have of the Stupidity Paradox in financial services regulation today?

The Stupidity Paradox: The Power and Pitfalls of Functional Stupidity at Work (Profile Books), by Mats Alvesson and André Spicer.

André Spicer is Professor of Organisational Behaviour at Cass Business School, City University London.

Mats Alvesson is Professor of Business Administration at Lund University and a Visiting Professor at Cass Business School.

What you have become is the price you paid to get what you used to want

3 Feb 2017

What you have become is the price you paid to get what you used to want

I have borrowed for inspiration from a quote from Mignon McLaughlin who wrote ‘The Neurotic’s Notebook 1960’ as I think it sums up very well where we are in the UK right now both in a society sense and a financial services sense.

I am a baby boomer and not a day passes with a moment of stark reality hitting me full on around the perception of millennials that society is failing them.

Where shall I start?

Well being born in 1951, I have seen quite a lot. Not as much as some but more than most around lifestyle changes and aspirations from the ‘50’s and ’60’s through until today.

In the post war era that I grew up in, the idea of family, friends and neighbours being victims of poverty, exposed to dangers various at every turn just did not exist.

The Thames froze. We had terrible smogs caused by coal fires, houses did not have central heating or double-glazing, toilets were outside the house, Bronco was the paper of choice. We would wake up from a duvet-less sleep in a house with windows frozen on the inside as well as the outside and after being given breakfast it was off to school, with school friends living nearby on foot.

We played in the street, unthreatened. we knew our neighbours, burger alarms were only found on banks.

Buses and trams represented the public transport offering. Milk was delivered by horse and cart, supermarkets did not exist, and food was rationed until 1954.

Homes that had a telephone would often share the line with someone else. And black and white televisions were tiny and for the rich.

Police were on the ‘beat’ walking the streets with clean white shirts and a very big hat, the Fire Brigade actually put out fires and ambulances took people (who actually needed to be there) to a clean and very efficient hospital casualty (not A&E) department. The call for emergency help was often made on a shared phone line or by your family doctor, not a GP, if they could not help.

If you were unemployed, you went to your local ‘Labour Exchange’ and got very little money to help in times of hardship. The credit card did not exist.

And as for financial advice, the ‘Man from the Pru’ was the ‘come to you’ solution. If you were a person of substance, your bank manager would assist, resplendent in attire and tattoo free.

Sixty five years on is this the time for a pause to reflect on whether life is better or worse in 2017 than it was in the 1950’s?