A good ten years ago I mentioned in a speech that we were professionals. I was rudely interrupted at that point by an observer who said that by definition we couldn't be professionals as we weren't in a profession.
I confessed to being speechless for a second and then agreeing with him. To this day we are not really any further on.
It’s all very reminiscent of my management training days when you had to manage someone who was ‘unconscious incompetent’ but thought he was ‘consciously competent’ - a bit like the three-year-old who stands on the car seat and believes he is actually driving. Unfortunately, most financial advisers who cause good financial advisers excessive FSA and FSCS bills won’t get to the point at age 17 when they stall their car, accept that message, learn, and move on.
Callum McCarthy has helped by putting a line in the sand, which says the model is broken and if, as advisers, we allow ourselves to accept that, we will move on. If not, keep an eye out for youngsters peering over steering wheels.
I think it’s time we accepted responsibility and raised the bar. But the following is an observation and not a judgement.
It’s clear that the vast majority of advisers and sales processes are broken. Many of these processes rely on insurance companies for their education. Many rely on the likes of Aequos as research. Quantitative research is really only useful after qualitative research has been completed and, interestingly, I rarely meet an adviser who has given it a thought.
Most suitability letters I review relate to the product and the product only. And the truth is your research is only as good as the questions you ask. Ask stupid questions to stupid systems and the answer is invariably going to be sub-standard.
So why is it that we ask such stupid questions? Any scientific researcher will show you that you need clear filters in your thought process. Put the finest mesh in first to clear out the system and you’ll save time.
So why doesn’t it happen at such a large scale? My view – it’s too big a task to take the large sales forces to that standard. Most of them still determine client risk as a number from between 1-5. How can you continue to move these herds forward whilst they insist on doing their own thing and jumping off cliffs?
You can’t, and the evidence shows that the problems exist in these large Titanic-like organisations, which is where the risk is. I think it’s time a fine filter was applied to ensure that the right people are giving the right advice.
What’s wrong with the FSA setting an annual written exam or face-to-face exam to test that every adviser knows what they are talking about in the key product areas? Sure it would cost, but I would pay the cost. This would cut out those giving advice on something they are clearly incompetent at. I read a bank’s report the other day which extolled the virtues of an investment bond in 30 lines and gave a unit trust a four line massacre. Are they for real?
I’m not talking about nonsense examinations either, like the standard drivel of ‘what would you do if someone came to you with a maturing Toisa?’ I’d tell him to read an internet website and call security to get him out of the office, that’s what I would do.
I’m really talking about clear questions on risk, deviation, portfolio planning, taxation of investments and real case studies. Those advisers who perform well could be given a longer license before coming back so as to fairly spread the risk. Those who failed would do so leaving their customers to be looked after by someone professional, and their boss would suffer financially– because the adviser wasn’t sufficiently trained.
The advantage is also that every firm would have to conform to an external standard rather than good firms raising the bar, only for the adviser on a bad day to decide to go where the water flows easier and jump ship.
Have Your Say: Alun Edwards, IFA from Rhyl, says:
Peter McGahan talks about the need for professional standards for IFAs and goes on to talk about setting an yearly exam. Really?
This is the the ONE thing that would set us out as a quasi-profession, and not a proper one.
Doctors, dentists and lawyers have never submitted themselves to such annual scrutiny - and never will - and are featherdusted the rest of the time.
However, Peter McGahan is very right in saying that professional hurdles and ongoing education need to be raised and improved, not least to deflect criticism.
Peter McGahan is managing director of Worldwide Financial Planning.
The views expressed are those of the author and not those of the company he represents.IFAonline
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