Strange days indeed

Panacea comment for Financial Advisers and Paraplanners

2 Nov 2017

Strange days indeed

The last couple of weeks since Harvey W got into trouble has seen an extraordinary meltdown in the retrospective world of #metoo

I have taken inspiration from Martin Niemoller, a protestant pastor, who became famous as an outspoken critic of Adolf Hitler. He spent some seven years in various concentration camps for his trouble.

In today’s climate Niemöller best-remembered quote could be re-worded:

First they came for the 60’s celebrity entertainers, and I did not speak out—
Because I was not a celebrity.

Then they came for the social media internet trolls, and I did not speak out—
Because I was not a troll.

Then they came for the studio bosses and actors and I did not speak out—
Because I was neither.

Then they came for me—and there was no one left to speak for me.

What is going on out there?

It seems that the latest to find themselves in the firing line for what I think the ‘Donald haters’ would call ‘misogyny’ are some high profile politicians.

I have taken notice of this because I have met some of them in the course of my Panacea work on regulation concerns of smaller IFAs.

First up is Mark ‘Sugar Tits’ Garnier. His Wiki page is worth a read.

Panacea has form with Mark and after providing him with a lot of research data to fight the IFAs corner via his TSC position we were rewarded with a brusque ‘sex and travel suggestion.

He is in the frame for getting his PA, Caroline, to buy vibrators for his wife and a friend, hopefully not on expenses. I have met both the Caroline’s in his life, his wife and ‘sugar tits’ too and I had held Mark in high regard until the greasy pole was mounted then climbed. He had been what seemed an IFA champion until he got bored with it and moved on from the TSC to his current role of International Trade Minister.

As they say, be careful who you upset on the way up Mark, in this case his PA, Caroline.

He is facing an investigation into whether he broke ministerial rules after he admitted asking his secretary to buy sex toys but at the time of writing has not resigned as an MP or a minister.

Next is Michael Fallon. His Wiki page is worth a read too.

Alan Lakey and I met with him to discuss longstop concerns in March 2010. He had no idea of the impact the longstop has and promised he would do what he could. That lasted until the 16th April 2010 when he washed his hands of it as being too busy.

He was, until this week, the Minister of Defence. And some hands on action on his part back in 2002 has landed him in trouble with journalist Julia Hartley Brewer. She dealt with the matter by saying “I calmly and politely explained to him that, if he did it again, I would ‘punch him in the face’. He withdrew his hand and that was the end of the matter”. 

His resignation speech and letter would suggest that there is more to this than just the casual touch of a ladies knee at a dinner party or a lothario joke about how best to warm up cold hands.

However, there is a bonus, he will no doubt, understand better about IFA longstop issues after this fall from grace as the JHB incident was 15 years ago.

These guys were TSC members overseeing financial services regulators. Both MP’s should resign, how can any MP look a colleague or constituent in the eye at their next surgery and maintain their respect after this.

The damage is enormous. When searcing for a story image with the key words ‘soho sex toys shops’ the images of Mr Garnier were all over the page.

As with everything in being involved in public life, it is the cover ups that cause the problems.

I suspect the #metoo moniker has some way to go. More will no doubt follow with accusations include groping, harassment and paying women to stay quiet. And it will not stop in the UK.

In fact we will see a reversal of that old adage that when America sneezes we get the flu. Look out, the #metoo’s are coming to Capitol Hill.

At least the politicians are not using this to attack each other, as this would appear to be a non-party issue.

And to think that so many of the newly discovered gropers and misogynists out there wanted to ban Trump from coming to the UK.

Makes you proud to be British.

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In the business of crime there’s two people involved

Panacea comment for Financial Advisers and Paraplanners

13 Oct 2017

In the business of crime there’s two people involved

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

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

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

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

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

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

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

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

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

Back to the future

Panacea comment for Financial Advisers and Paraplanners

9 Oct 2017

Back to the future

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 4th 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 17th June 1999 and the Commons 1st 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 1st January 2013.

Buzzwords

Panacea comment for Financial Advisers and Paraplanners

20 Sep 2017

Buzzwords

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

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

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

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

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

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

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

Why?

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

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

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

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

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

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

Money laundering and the Premier League

Panacea Comment for Financial Advisers and Paraplanners

4 Sep 2017

Money laundering and the Premier League

‘Some people believe football is a matter of life and death. I’m very disappointed with that attitude. I can assure you it is much, much more important than that.’ Bill Shankly

And it would seem to be as true today as it was then, but for very different reasons.

A staggering £835m was spent in total by all 20 Premier League clubs during the August 2014 transfer window which was over 30 per cent up on the previous record of £630m which was recorded during the last summer window in 2013.

The August 2017 transfer window has just closed and as the transaction fog clears it seems that over £1.47bn has been spent by UK clubs on ‘buying’ players to ‘kick a ball about’.

Wages are of course on top.

In the 206/17 season some £2billion was paid to players in England’s Premier League, some 61% of turnover. The top five clubs account for half. Clubs like Manchester United, Chelsea and Liverpool have an average wage bill of over £200m.

In any other business environment figures like this would doom any business to failure, and very quickly. But not football. And it would seem that the majority of clubs making a loss are ‘foreign owned’.

According to the Financial Action Task Force (FATF) in the past two decades, “football has changed from a popular pastime into a global industry. With the growing economic importance of football along with other sports, the investment of money into the sector has increased exponentially, and some of this has criminal connections”.

The FATF recently completed a study to determine what makes the football sector attractive to criminals.

It is a globalised sport and some 250 million people play – according to FIFA the 2014 World Cup reached 3.2 billion viewers, one billion watched final.

Despite rapid growth and the very high level of global visibility the Premier League football sector has, UK’s football’s regulatory structure, and that of others in world football has still not yet caught up with some of the risks that come with these changes.

Europol, for example, recently dismantled a Russian money laundering exercise in Portugal.

It seems that the techniques used by the laundering community can be summarised in a simple four-step ‘wash and dry cycle’. I am sure these four simple steps will ring some bells and identify club examples near you.

  1. Find a football club in real financial danger of collapse
  2. Gain access to the club boardroom, garner trust by making some short term donations or investments into the club
  3. Then, after a while, buy the club using funds sitting behind a myriad of opaque holding companies often owned by offshore shell companies
  4. Then you are off to the laundry. You get busy over or under valuing players on the transfer market, negotiate purchase structure of TV rights, engage in ancillary betting activities etc

We live in such a highly regulated world. How is it that:

  1. buying a car,
  2. getting a mortgage,
  3. selling a house,
  4. opening a bank account,
  5. arranging a loan,
  6. getting connected to a utility supply,
  7. becoming a client of a financial advisory firm,
  8. becoming a regulated firm with the FCA  (the list is endless

the process can be so convoluted by time consuming checks and proofs?

Yet a football club deciding to spend £75m on a twenty something football player (who in a gentler age Don Revie would describe as “When he plays on snow, he doesn’t leave any footprints”, almost overnight on the 31st August, is so ‘simples’.

Does anyone out there know?

Most people forget the third part

Panacea comment for Financial Advisers and Paraplanners

20 Jun 2017

Most people forget the third part

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

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

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

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

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

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

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

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

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

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

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

  • “Lessons will be learned”:

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

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

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

“I deeply regret”:

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

“Mistakes were made”:

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

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

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

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

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

Better still, just shut up.

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

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

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

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

 

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

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

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

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

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

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

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

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