The Finance Bill clarified the issue on trusts and laid to rest some of the worst fears of advisers and providers. But it amply demonstrated how vulnerable the industry is to the whims of politicians. At our roundtable of leading financial planners this month, the difficulty of explaining legislative changes to clients while retaining credibility emerged as a significant issue.
There is no doubt that advisers are, to some extent, the victims here. As Justin Urquart-Stewart, who chaired the roundtable, so rightly pointed out, no-one loses faith in their GP because they can no longer recommend a certain drug. People are all-too-ready to blame the caprices of legislators, politicians or regulatory bodies in this instance.
But when a tax-planning tool is removed or advisers find they can no longer recommend a certain product, advisers are frequently thought to be to blame. How can they get round this? Our roundtable concluded that it all came down to the relationship with the client. Build a GP-style relationship and the product ceases to matter. In this way, advisers can use legislative changes as an opportunity for pro-actively getting back in touch with clients, building the relationship and showing clients they are on top of their financial planning needs.
Managing these client relationship management issues is obviously harder - though clearly not impossible - while advisers are still generating much of their income from initial commission on product sales. Clients are more likely to believe that advisers are somehow in cahoots with the Government if they see advisers making money from transferring them out of one product and into another on the basis of legislative changes. This type of adviser will have to make sure his client relationships are even more secure.
Ultimately it comes down to trust. We explore the idea of the adviser's long-term duty of care on page 4. At our roundtable, again and again, the advisers concluded that the best defence against regulators, legislators and Governmental whimsy was strong client relationships. To this end, for many advisers the real problem in their business is not too few clients, but too many.
Cherry Reynard, editor
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