FOS compensation hike. Hand me the black cap, will you

Panacea comment for Financial Advisers & Paraplanners

20 Mar 2019

We highlighted in November the need for firms to respond to an FCA consultation on a proposed FOS compensation limit hike of 200k taking the maximum  pay-out to £350k.

It was announced with very little time to respond.The consultation opened 16 Oct and closed 21 Dec so slightly over two months.

Just one hundred firms, including Panacea responded.

Rory Percival commented in our LinkedIn discussion that “100 is a fairly typical response rate, more than many consultations, and hardly the fault of the FCA. Don’t get me wrong; I have serious reservations about the result but to suggest the process is unfair is in itself unfair”.

The FCA said that “proposed changes to the ombudsman service’s award limit will ensure more complainants receive fair compensation when the ombudsman service upholds their complaint against a firm”.

At Panacea, we believe that this will see the end of smaller IFA firms due to impossible capital adequacy requirements caused by higher excesses to deal with £350k claims and a PI market that just will not want to play.

It will be the end of anyone looking to start a new firm because of capital adequacy constraint.

It will mean that PI premiums will get so high that only the largest firms could afford it.

And, you guessed it, more firms falling into FSCS default with fewer firms being left to pay the increasing calls for cash.

Truly, this is the industry, sorry profession, that will destroy itself.

Why have they done this, or is it an April Fool a bit early?

FCA chief executive Andrew Bailey reckons that: “Consumers and small businesses struggle with the cost and time needed to take firms to court, so it is essential they can receive fair compensation from the FOS when things go wrong.

And then, that now sickeningly often used regu-speak:

“We have listened carefully to the feedback we have received and believe our approach is right”.

Really? What feedback and from who?

The consultation period was very short. The implementation date just weeks later.

My view at the time of the consultation announcement, possibly quite wrong, was that the outcome was already decided and the consultation was to make sure that the process appeared to be correctly followed.

100 respondents is pretty poor and in itself an indication of the adviser community’s lack of trust and openness in a flawed system. Historically, I cannot think of any consultation that that has seen an outcome that was contra to what either the Treasury, consumer groups or the regulator wanted.

We were right regarding the outcome, this was not a consultation at all.

Rory Percival reckoned, again in our LinkedIn discussion, that “just because the FCA didn’t agree with responses, it doesn’t mean it didn’t consider the issues appropriately or that its approach was unfair”.

This sounds a lot like Lord Meltchett’s Court Martial of Blackadder.

Blackadder’s court martial was, shall we say, less than fair. Lord Melchett was the judge and Darling the prosecution. Meltchett opens the case by saying, “The case before us is that of the Crown versus Captain Edmund Blackadder, alias the Flanders Pigeon Murderer. Oh, and hand me the black cap, will you – I’ll be needing that.” 

Now that’s consultation?

I rest my case.

Back to the future

Panacea comment for Financial Advisers and Paraplanners

9 Oct 2017

Another major brand has announced that it is about to increase its financial planning operation with a hire of some 30 new advisers and another 70 next years. A sure sign that the 2017 advice gap provided both opportunity and a solution to dealing with the thousands of disenfranchised customers of major, highly reputable brands who have to find a way to service former IFA clients who no longer have an IFA, having fallen victim (if that is the right word) to IFA segmentation since RDR.

In 2011 I noted there was growing concern about what consumer reaction would be to what has now been done in their name by the then regulator, the FSA.

I observed that as there were only so many high-net worth clients out there, what will happen to the mass market advice model, and asked what will happen to the “orphan clients”? Will we see the return of the “Man from the Pru” and provider ‘sales’ forces?

It would seem I was right some six years later.

Trade press of 4^th March 2010 alerted readers to a then quite astonishing admission by the FSA’s then Head of Investment Policy Peter Smith.

It reported that when speaking at a Chartered Institute for Securities and Investment Private Wealth Management Conference in London, he spoke about the potential for consumers rejecting the big idea about adviser charging and confessed, “If consumers still do not want to engage with it then we probably will have to do something else.”

This really beggars belief. The various discussion and consultation documents have thrown up numerous proposals, many of which have been dropped, reformed or deformed and it is absolutely clear that much RDR directional thinking had been navigation at sea with only a world atlas to chart the way- something that will give a general idea of what landmass is where but zero detail about the hazards presented by the ocean the vessel is travelling on.

This may be acceptable behaviour in regulation-world but let’s not forget that it is the advisers and consumers whose boats would be heading for the rocks.

It was clear in 2010 that the regulator failed to understand the psychology of adviser/client interaction. In 2011 it was the same but it has no intention of listening to the responses from experienced industry navigation professionals, providers, lawyers, MPs, trade bodies and of course advisers.

Not content with being the body that was asleep at the helm when Northern Rock slammed into the rocks followed by the rest of the UK banking “Armada” it seems the FSA also wanted to be remembered as the quango responsible for the decimation of retail financial services.

With all this in mind, perhaps we should look back to 17^th June 1999 and the Commons 1^st reading of the FSMA 2000 bill and ask the question, why does nobody in regulation ever learn from it’s past mistakes.

The transcript of this debate from 1999 highlighted  so many issues of concern that were expressed then with the seemingly strange phenomenon in the regulatory world of foresight!

Nobody listened then and I am reminded of the quote from the late Bob Monkhouse when thinking about the impact of poorly thought out regulation upon the consumer of tomorrow “They laughed when I said I was going to be a comedian. Well, they’re not laughing now”.

The industry is not laughing now, neither was the mass-market consumer after the 1^st January 2013.

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. 

Regulation, will we ever get it right?

I had the great fortune to sell my IFA practice 10 years ago, a driver for taking the plunge was that having worked under the ‘control’ of 4 different regulatory regimes- NASDIM, FIMBRA, PIA and FSA, the prospect of never seeing a balance of common sense and fairness painted a very bleak future.

The jury may still be out in that regard, but I think we are at the stage where the Judge may be directing the Jury that a majority decision would suffice.

I am not normally driven to negativity, cynisim maybe, and while I do see an absolute need to have regulation of financial services, it seems to me that wherever there is regulation, chaos and extreme cost is the outcome with blame being laid at the door of the weakest.

Some key facts to digest:

• Regulation is poorly thought out in just about every industry
• It is reactionary rather than pro-active
• It is not always retrospective, although in financial services it seems to be an exception
• Nobody ever listens to the voice of experience
• Nobody ever learns from past failings
• Nobody in regulation admits failure
• Nobody in regulation takes the blame
• Everyone in regulation benefits from ‘learnings’ and earnings
• Regulatory failure is rewarded not punished
• Regulation is an industry, it is hermaphroditic, capable of self procreation and without something to bash it would have no purpose. As Keith Richards (Rolling Stone not PFS) once said “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.”

 

Regulation should not be pursued at any cost and in such a way, applied like a tattoo only to be regretted when the effect of the alcoholic induced stupor that fuelled its creation has gone away. The NHS is an example of regulation on ‘acid’.

Has the consumer benefited? Many may say no. Access to financial advice for the masses has been exterminated. Even if it was freely available, there is insufficient capacity to service any more than around 10% of the population based on the recent Heath Report and the FAMR will not correct that imbalance as was intended.

In 2009 the great and the good expressed concerns about the impact of RDR and how it will disenfranchise consumers, here but just a few to prove my “Nobody ever listens to the voice of experience” comment

• Otto Thoresen – CEO ABI, then of Aegon: “The RDR is only helping wealthy customers”
• AXA April 2009: “We will lobby the FSA to make sure the RDR does not mean less are able to access advice”
• Institute of Financial Services: “RDR will impair financial advice before improving it”
• Alasdair Buchanan Scottish Life November 2009: “Sales advice is a real cop out and extremely confusing to investors”
• Stephen Gay – Aviva June 2009: “The regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes”
• Lord Lipsey: “Consumers in the middle (not high net worth or money guidance fodder) to be sold products by banks under the contradiction that is sales advice”
• Walter Merricks former Chief Ombudsman: “I think it would be unwise to count on the assumption that complaints from the retail investment world are suddenly going to go down as a result (of the RDR)”
• Deutsch Bank report August 2009: “There has been industry talk of 30% or even 50% of IFAs exiting the industry post 2012, which is not impossible”
• Paul Selly HBOS: “Bancassurers set to benefit”
• Richard Howells Director Zurich Life June 2009: “The big question mark is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can really hang my hat on.”
• Martin Lewis Money Saving Expert June 2009: “There’s a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I do hope I’m wrong. I’m not convinced most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash. What I find most galling though is that bank-based advisers – those primarily responsible for PPI miss-selling, endowment miss-selling, investment miss-selling and generally poor advice all round are still to be allowed to be remunerated based on the number of sales.”
• Janet Walford OBE, Editor Money Management Sept 2009: “I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unintended consequences may well mean that this will be the result. This is especially the case when set alongside the myriad of other proposals that are costing some £430 million to set up, with ongoing fees of £40 million pa thereafter, a mind boggling amount of cash.
• Peter Hamilton barrister, Source: Money Management Oct 2009, Scrapping the FSA by Marie Jennings MBE: “The Financial Services and Markets Act does not permit the FSA to cancel an authorisation simply because the FSA has changed its views on what the appropriate qualifications should be…. It is one thing to impose new rules for new entrants to the IFA profession, it is quite another thing to disqualify someone who is already qualified.”
• David Hazelton of Tax Incentivised Savings Association (TISA) 30/10/09: The RDR could be detrimental to consumers both in terms of higher product charges and an increase in the cost of advice, warns the Tax Incentivised Savings Association (TISA). Implementation costs for the RDR are being “seriously underestimated” and product charges will consequently have to be raised.
• Robert Kerr, head of retail distribution development at Scottish Widows says: The RDR could have the unintended consequence of “disenfranchising” the majority of consumers from financial advice. “Our key concern is the RDR proposals will act to drive advice upmarket, with financial advice becoming the preserve of the wealthy leaving mass-market consumers un-served,”
• Nigel Waterson MP when Shadow pensions minister: “While no-one can object to raising the standards of training and competence, should an emphasis on exams take precedence over on-the-job training and experience?

Fines are at record highs for the same bad behaviour from the same suspects, regulatory costs are at an all time high, huge FSCS levies continue to hit ‘small businesses’ when least expected, politicians have no control of those they leglislate to regulate, those employed in financial services regulation have increased, those employed in the financial services sector they regulate have decreased.

The problem with regulation in 2016 is that you cannot regulate for lack of common sense, yet that is what we keep trying to do. Caveat emptor has gone.

We have lost the use of that in-built gene of common sense when looking at constructing and applying regulation.. Its loss went along with map reading skills, crossing the road after looking both ways, not talking to strangers, proficient cycling, spelling ability, simple mental arithmetic skills and very many more.

The world has truly gone mad, or at least it has in UKplc’s regulation section.

We have a society that is now readily and speedily offended on somebody else part for just about everything that simply should not matter as much as it does.

We have borders that are not fit for purpose, we have an NHS in meltdown because the service is now aspiration and expectation based, rather than focusing on the basics of it’s original 1948 founding principles (comprehensiveness, within available resources) and a country controlled not by UK based elected politicians but by unelected civil servants, quangos, eurocrats and regulators.

To top that we now have ‘Brexit’.

To borrow that famous Bob Monkhouse quote “ When I said that the proposed RDR regulation would not work, everybody laughed. Well they’re not laughing now.

 

www.panaceaadviser.com

Getting your Human Resources in order

A free guide to HR by Panacea Adviser

These are significant times for the advisory profession as regulation continues to drive financial services to the brink. Consequently it is of great importance that adviser firms have the right people in place and know how to get the best from their staff.

This is why we have developed this new guide, ‘Getting Your Human Resources in Order’, to try and help clear up any human resource ambiguity, as effectively managing HR is essential.

This guide takes business owners through the basic principles of how to hire, manage and get the best from their employees, to dealing with disciplinary issues, maternity leave and subsequent return to work, and finally how to handle redundancies. All key factors to ensure your workforce remains a contented one and you are safe in the knowledge that you are doing things in accordance with employment law.

In an industry where regulation is ever changing, it is important that staff do not, for they are one of a company’s best assets and when treated fairly, a business is more likely to succeed.

This guide is intended for small firms, and line and team managers in larger organisations.

Download for free at http://www.panaceaadviser.com/hrguide

Gizza job, I can do that.

The New Year is traditionally a time when many people reassess their professional roles and decide a change may be worth pursuing. For many people I suspect this involves looking for a new job – indeed recent research published by the Institute of Leadership and Management (ILM) revealed that 37% of workers say they are planning to leave their current jobs in 2015, a significant increase on the 19% who answered the same way in 2014 and the 13% in 2013.

But what about the financial advisory profession? How many advisers reading this article are considering a career change? I suspect very few although, given the average age of advisers, I wonder if most aren’t looking forward to retirement with some considerable relish. To be honest, I can’t blame those advisers who might be looking for an early exit – this job comes with some significant pressures to deal with whether they are in the form of regulation, increased costs, political interference, constant change, professional development requirements. The list goes on.

Unfortunately having to cope with these ongoing developments and the growing requirements placed on advisers has – in this country at least – somewhat detracted from the attractiveness of financial advising as a career choice. I am always interested in the ‘job reaction’ you get from people when you tell them what you do. How are financial advisers perceived? Are they thrown in the same pot as estate agents or journalists or parking wardens? I hope not given the job advisers do and the focus on quality and service.

Then again, the nature of what a financial adviser is and does has been systematically depowered by the continuous regulatory changes and developments. It is about to become even more confusing for consumers in April when a whole host of pension ‘Guidance agents’ are unleashed on the at-retirement market with only a requirement to have “some pensions knowledge” as the recent Citizens Advice job specification put it.

Of course it doesn’t have to be this way. Last year research conducted in the US by Rapacon placed being a financial adviser as one of the top ten jobs to have in the future. It is clearly a sought after career choice suggesting to me that the profession’s reputation across the pond is not just intact but strong and enticing to those looking at their employment. Can we really say the same in the UK?

So, how can we improve the reputation of the profession, ensure it is attractive to new blood, and develop greater consumer understanding of what advisers do, their value and worth, and why it’s a job worth having? Like most things, I believe it’s important to start with yourself. To that end, it’s about being the best you can be in your individual role which does mean self-improvement, lifelong learning, a commitment to continuous professional development, etc. If advisers are focused on self-betterment, on improving themselves and increasing their own standards, then this will clearly feed into the service they offer which will improve reputations and generate strong feedback and referrals.

Advisers need to be fully focused on their own roles which means not getting into a rut and instead retaining interest in the job and everything about it. Learning more and securing greater knowledge is a fundamental way to do this – we have recognised this for some time which is why we established a CPD library containing both structured and unstructured material which is easily accessible and allows the adviser to continually load up on new information. It will not only help the adviser improve their service offering but feed through into a growing positive reputation for the profession.

A profession renowned for its security, its prospects and the quality of its overall offering will clearly be attractive to those who are working in other areas or have yet to start work. While the legal, accountancy, and banking sectors have been tapping into the graduate market for decades, establishing these careers as worth pursuing, unfortunately the advisory community has not been working at the same level.

If we do want to bring new blood into our community then we certainly need to begin pushing and marketing the profession in a much more focused and structured way. Our professional and trade bodies must work closely together on developing an ongoing campaign that supports individual firms’ own recruitment policies if we are to raise the profile of being a financial adviser and make it stand out from the crowd. This should be a long-term commitment that highlights the positives of the profession and sets out the very tangible and compelling reasons for being part of it.

With the New Year being a time when many people consider what they should be doing next now is certainly the right point to secure our own professions’ future.

 

FCA fines skim. You can only milk a cow so long before you’re left holding the pail.

I had the good fortune to meet former US President Ronald Reagan a good few years ago while walking along the beach in Santa Monica. Although in his declining years he cut an impressive figure and gave me a very snappy salute and a smile.

In his prime he had an interesting take on Governments and taxation, saying “a Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidise it”.

The increasing cost of regulation on firms is significant and for firms who have consistently kept a ‘clean sheet’ there is a feeling that this is not being rewarded quite as it should be.

In what form that reward should be had previously been understood to see fines levied for bad practice and behaviour used to reduce the regulatory cost on firms who had ‘done the right thing’ with their customers.

But that is no longer the case.

Indeed it appears quite surprising that many so in the industry (if my recent conversations are to be a guide) are oblivious to the fact that those whopping fines (some £1,461,875,800 in the year to mid December 2014) are not being used to reduce costs in a way that may, indeed should be expected.

We felt that a degree of clarity was now required as the fines were, it seems, just going straight to the Treasury, without passing ‘Go’. A craftiliy legislated ‘skim’ of gargantuan proportions

What seems even more bizarre is that the vast fines levied by the FCA are against, in many cases, banks bailed out by the taxpayer on the actions of the Government.

Yep, you are right. The taxpayer ‘owned’ banks are fined for bad behaviour, therefore, these fines are in effect paid by the taxpayer and not the offending individuals.

In levying these fines the Treasury and the FCA are simply engaging in a breathtaking form of state sponsored and legislated money laundering.

It goes like this.

• Banks bailed out by the government of the day
• Bad behaviour of epidemic proportion discovered and/or declared
• Regulator investigates in a manner that would do General Melchett proud
• Guilty verdict delivered
• Sentence predetermined and fines calculated
• Fines paid to the FCA by the very banks that have been bailed out by the taxpayer.
• Money returned by FCA to the Treasury, who it could be argued has paid the fine by way of earlier taxpayer bailout.
• And it’s tea and cakes at the Ritz before you know it.

This is madness. If the banks, especially state supported banks, are such villains keep them out of the FCA’s jurisdiction and budget, quarantine them in the Treasury or Bank of England until they are safe to come out, disease free.

I wrote to the FCA with a ‘Freedom of Information’ request in November, it read as follows:

“The total amount of FCA imposed fines levied so far in 2014, according to the FCA website today stands at £1,471,431,800. There was an understanding, possibly even a requirement in the industry, that fines would be used to reduce the regulatory cost burden on firms. In fact rewarding good practice at the expense of bad. It now appears that this is no longer the case. I would be grateful if you could confirm the following:

 How much of the above figure has been paid away to the Treasury in 2014 for so called ‘good causes’ use? 

On what or whose authority was this ‘pay-away’ made possible

When was that decided?

Was the original intention of cost reduction made clear to the Treasury before the decision to ‘pay-away’? 

Was any attempt made to persuade the Treasury that fines should really be used to offset the regulatory cost burden on firms? 

What was the budgeted cost of regulation to date in 2014? 

What is the actual cost so far for regulation in 2014?”

The reply, now received reads as follows:

Freedom of Information : Right to know request

Thank you for your request under the Freedom of Information Act 2000 (the Act), for information about FCA fine levies and HM Treasury (HMT).  The full request is shown in the attached Annex. 

Your request has now been considered and we hold the information which falls within the scope of your request. I have numbered your request for ease of reference and will answer each point in turn.

1               How much of the above figure has been paid away to the Treasury in 2014 for so called ‘good causes’ use? 

To date, we have received, £1,461,875,800 rounded to the nearest 100, (99.4% of £1,471,431,800 of the fines issued in the calendar year 2014).  The net figure paid to HMT of £1.37bn (as at 10/12/2014) reflects payments made in 2014 to date (iro 2014 fines only)     less 2014/15 budgeted Enforcement costs   which we retain and give back to fee payers.  We have no knowledge of what HMT do with these funds, as once they are paid over it is up to HMT how they use the money.

          The penalty receipts paid over to HMT are as per paragraph 20(6) of Schedule 1ZA Financial Services and Markets Act 2000 (“FSMA”), attached. 

2               On what or whose authority was this ‘pay-away’ made possible.

This was a decision by Parliament, Statutory Instrument 2013 no.418 – Financial Services and Markets – The Payment to Treasury of Penalties (Enforcement Costs) Order 2013.

3               When was that decided?

The above-mentioned Statutory Instrument was laid before Parliament on 27th February 2013 and came into force on 1 April 2013. 

4               Was the original intention of cost reduction made clear to the Treasury before the

          decision to ‘pay-away’?  

          HMT was fully aware of the arrangements in place to return penalty receipts back to the industry prior to introducing Statutory Instrument 2013 No.418.

 

5               Was any attempt made to persuade the Treasury that fines should really be used to offset the regulatory cost burden on firms? 

The predecessor body, the FSA, did discuss the impact of this new arrangement on firms with HMT and successfully made the case that penalty receipts paid over to HMT should at least be net of our Enforcement costs.  As a consequence, the regulatory cost of Enforcement activity is not borne by the industry.  This is evidenced by firms continuing to receive a “deduction” on their FCA annual fees.      

6               What was the budgeted cost of regulation to date in 2014?  

The FCA’s Ongoing Regulatory Activity (ORA) budget in 2014/15 is £452m as per our published business plan for 2014/15.The budgeted cost of regulation from April to 30 October is £264m. 

7               What is the actual cost so far for regulation in 2014?

          The actual FCA ORA expenditure from 1 April 2014 to 30 October 2014 is £264m, in line with budget.

If you have any queries then please contact me.

So, regulated firms are paying £264m in fees to the regulator to cover the FCA budget, in addition they are paying levies to the FSCS for the 2014/15 budget of £313m,for 2015/16 it will be set at £287m.

The levy can cause considerable distress to small advisory businesses as the sums are often large, unpredictable in amount, timing and require immediate payment.

While all this is going on, £1.37bn in fines is being ‘skimmed off’ to the Treasury and being used, assuming we actually believe the Government spin, for ‘good causes various’ like sending the Tower of London Poppies on a UK tour. Having seen the display last week, packed and ready at the Tower, I think some change may be left over.

To quote another former US President (George Washington) “It is better to offer no excuse than a bad one.” This is unfair, immoral and must stop.

The biggest obstacle to consumers getting easy access to independent financial advice is cost.

The biggest cost to financial services firms after salaries are for regulation.

Surely it does not take too much cerebral activity to calculate that with the FCA costs of £264m plus the FSCS budget of £313m, fines exceed regulatory costs by £894,431,800.

This chould mean that offsetting fines against the cost of regulation and compensation levies could have given the industry ‘good guys’ a ‘free ride’ for over 2 years and those hard pressed ‘consumers’ or give “low end savers” as Mark Garnier MP calls them, access to financial advice at a very much reduced cost as they can benefit too from the reduction in the regulatory cost burden.

Dare I suggest that these fines could have even funded the FSCS based upon the current budget for at least 4 years, again reducing costs for consumers?

That would be a very moral, even sensible use of such large fines would it not Mr. Osborne?

The Treasury is treating the financial services industry as a ‘milking cow’. The cost of demonstrably reprehensible bad behaviour, mostly by banks, should benefit the good guys ultimately reaching their clients, the great British consumer.

Henry Ford famously said, “it is not the employer who pays the wages, they only handle the money. It is the customers who pays the wages”.

And in the world of financial services it is ultimately the consumer who pays the bill for increasing fees by increased advice and product charges.

With politicians thoughts turning to the May 2015 General Election there are some questions that should be asked by those who own and operate regulated financial services businesses should they get door-stepped in the coming months.

The first action should be: “why are you using my industry fines to support Treasury spendin instead of reducing my fees”? 

The second should be to support my Downing Street petition asking that: 

Parliament should reverse SI 2013 No218 allowing consumers to benefit instead by way of lower product charges and access to lower cost independent financial advice as a result of fines for bad behaviour reducing regulatory costs on MY firm.

Esther Dijkstra on Scottish Widows protection and improving customer engagement

Scottish Widows must be one of the most iconic brands in UK financial services.

And after almost a ten-year absence they are about to launch back into the adviser protection space.

My guest today is heading up that relaunch. Whilst she isn’t going to tell you all the secrets of the new proposition she does drop some tantalising hints.

Esther is passionate about customer engagement and share her views on what we as an industry need to do to improve that engagement.

Hear Esther talk about the importance of using emotions rather than statistics to empathise with customers.

Listen how looking at completely different propositions, in this case Spotify, can give you a different perspective on customer engagement.

Listen now

Setting the record straight with Phil Loney, Group CEO Royal London

With aspirations of becoming “the Waitrose or John Lewis of the insurance sector”, Royal London group chief executive Phil Loney has certainly had his hands full in the three years since taking the helm of the mutual, which boasts a heritage that dates back as far as the 1860s.

Royal London is mid-way through a rebranding exercise that will see it evolve from overarching seven trading names working on its behalf, to the core and single brand standing firm today.

That’s quite a challenge for any CEO, so for Loney, supported by ‘Man from the Pru’ advertising mastermind Clare Sheikh, how did he find the process of streamlining the brands to collectively signify great quality with value for money – his “strategy of differentiation”?

“We aspire to be the company that is providing the best outcomes and best experiences for consumers, which we believe is rooted in our mutuality,” Loney explains.

“We found all our brands were relatively well-known amongst the insurance industry and reasonably well-known by intermediaries but really poorly known – as was Royal London – amongst consumers.”

Practically, rebuilding seven disparate brands was neither on strategy nor affordable, so Loney set about explaining to the people working at Royal London, RL360°, Bright Grey, Scottish Provident, Scottish Life, Ascentric and IFDL (the acquired Royal Liver and Co-operative divisions had already been absorbed into the Royal London brand) their top-level strategy and approach with the need for internal buy-in a major priority.

“You hope to arrive at a tipping point, where enough people like what you are doing,” he adds.

Under the guidance of Sheikh, the business set about designing what the new brand would incorporate, following comprehensive research with consumers, intermediaries, and staff members.

Part of the process was the inception of an internal communications initiative of having “pelican pods” – small teams of people from all facets of the business working together to develop and articulate the brand values and culture, in consultation with their wider colleagues.

The naming was the easiest part, he said, with Royal London being the actual mutual, the life fund, the umbrella company. As luck would have it, it was also the name best received in focus groups, with “Royal” speaking of quality and “London” suggesting credibility in financial services.

In day-to-day terms, the business had already begun its transition to shared operating platforms across the group, refreshing their technology and deciding on the target architecture to be used for, say, its pensions or protection business.

After the initial internal resistance, which was ultimately about managing emotional responses from the most logical of minds, forced to wrap their heads around being part of a bigger entity (while enjoying the benefits that brings), Loney believes they almost future-proofed the response from the IFA community – renowned for brand loyalty – by ensuring that personnel, systems and processes had already started being aligned before the rebrand took place, such as customer service. This mitigated any negative user experience, rather improving it – softening the brand blow, as it were.

Looking ahead, whichever new government succeeds next year will be receiving a call from Loney to help tackle the UK’s shortfall of people with the right financial solutions in place.

With the cost of full advice being pushed upwards, Loney stresses the solution is not black and white.

“I don’t think financial education or guidance are alternatives to advice,” he stresses.

“What we do propositionally only becomes meaningful if it comes together with genuinely impartial financial advice. I think as people set about the long-term job of educating themselves and become more cognisant of the complexities of their circumstances they will become more likely to want to buy advice.”

Written By Sam Shaw

While shepherds washed their socks by night

My musings surrounding some of the more ridiculous aspects of today’s financial services industry have attracted some attention over the last year.

But with Christmas almost upon us, and 2014 drawing to a close, I felt it worth waxing lyrical on the growing, disturbing patterns of social behaviour that upon closer examination would have parents of the baby boomer generation turning in their graves.

UKplc has developed an appetite for expressing offence on behalf of others, outrage, remorse and grief on behalf of others and now we hear that the mob of ‘mad’ has turned its wrath on to chickens.

My father, a WW2 8^th Army survivor, and my mother, an interpreter at the Nuremberg trials after the war, would no doubt be asking the question- “was it all worth it” if they were still alive and reading news headlines of today?

Britain it would seem is in crisis, no longer being trusted to cook a chicken for fear of having to handle it.

As always, blame needs to be apportioned or the lawyers and councillors would have nothing to do. Responsibility is firmly placed on the supermarkets where, we are told, as many as 79% of chickens sold by one leading brand contain‘campylobacter’ on the dead bird’s skin. This is all according to the latest research from the Food Standards Agency (FSA). Yes I know, another FSA doing good things on behalf of the nation without accountability at your expense.

From a UK population of some 64.1m, this bug is responsible for an ‘estimated’ 280,000 cases of food poisoning (through poor food handling and hygiene on behalf of the end user consumer I suspect) each year and as is to be expected in 2014 UK society, the consumer groups have piled in stating that supermarkets should ‘hang their heads in shame’ for selling food they know is dangerous.

The problem here is that in 2014, we cannot cook a chicken safely, either because we have never learned to or expect it to cook itself. We have lost the use of that in-built gene of common sense. Its loss went along with map reading skills, crossing the road after looking both ways, not talking to strangers, proficient cycling, spelling ability, simple mental arithmetic skills and very many more.

But wait, could things get worse?

They could indeed.

It would seem that the great British tradition of drying your washed socks indoors on a radiator is putting the nations health at risk.

Professor David Denning of the National Aspergillosis Centre in Manchester has issued the warning after treating a growing number of patients who have inhaled Aspergillus fungal spores, residing it would appear, in their supposedly freshly washed and now drying socks. Clearly there is not too much else going on in his world today.

Close analysis of news like this simply shows the dreadful shallowness of life in UKplc today, being played out in a month when we heard that some 2m Brits are eligible for gastric band surgery rather than take a the less invasive option to lose weight or the continued fallout from Laurence Llewelyn Bowen’s winter ‘Blunderland’ or that prospective parents can now be given ante-natal relationship classes by their cash strapped, time poor NHS, via an appointed Midwife to try to reverse the ‘shocking’ collapse in traditional families brought about by having children.

The world has truly gone mad, or at least it has in UKplc’s section.

We have a society that is now readily and speedily offended on somebody else part for just about everything that simply should not matter as much as it does.

We have borders that are not fit for purpose, we have an NHS in meltdown because the service is now aspiration and expectation based, rather than focusing on the basics of it’s original 1948 founding principles (comprehensiveness, within available resources) and a country controlled not by UK based elected politicians but by unelected civil servants, quangos, eurocrats and regulators.

My parents’ world and indeed my childhood world of the 1950’s is no longer there. Sadly, I think this is for the worse.

Children cannot it seem safely walk the streets without fear of molestation or abduction. In fact muggings have forced St Pauls school in London to ban blazers: and wear hoodies to blend in with local youths thereby avoiding the risk of attack.

Police it seems cannot deal with muggers like this as all their time is spent on dealing with historical abuse allegations and hate crimes, all very serious but why let off those committing real time crime – easier targets to apprehend surely? Instead valuable resource is directed toward matters that often have little supporting evidence other than some ‘he said/ she said’ statements about events that took place in the ‘swinging’ 60’s and 70’s or the accused is long dead?

You cannot be admitted to hospital without a fear that you will die from something you did not have when you went in on a Friday afternoon. Respect, manners and common courtesy for others are at an all time low.

And as for regulation and financial services?

The man from the Pru has long gone along with that oh so trusted ‘Captain Mainwaring-esq’ bank manager, the City stockbroker and accountant only to be replaced with spiv bankers, greed, excess and more regulation at ever increasing cost with little effect.

Even financial services fines are not being used as intended, instead now going toward politically correct good causes rather that reducing the cost of regulation on firms with good records.

But there is a welcome ray of light being shone by Ministers who are including plans to allow under 16’s to buy liqueur chocolates as part of the Deregulation Bill, a ‘much-trumpeted’ attempt to remove unnecessary red tape currently going through Parliament.

As a footnote, section 61 is worth a read. It refers to “Exercise of regulatory functions: economic growth” stating:

A person exercising a regulatory function to which this section applies must,
in the exercise of the function, have regard to the desirability of promoting 35 economic growth. In performing the duty under subsection (1), the person must, in particular, consider the importance for the promotion of economic growth of exercising the regulatory function in a way which ensures that—

1.       regulatory action is taken only when it is needed, and 
2.      any action taken is proportionate.

It will be interesting to see where that leads with red tape removal in financial services?

Many of today’s post war generation may have a different view, but I think I have answered my parents ‘rhetorical question’.

It was not worth it.

Be careful out there.

WW2 8th Army history

Nuremberg trials history