Balancing expectations can be a tricky business; with a new client in the door, one of the first things to tick off the list is a risk assessment and a promise to thereafter take responsibility for the category of investment they recommend, keeping to client expectations.
However the grey area stands where a provider also risk profiles an investment vehicle and sends out literature that can be, and indeed has been, misleading for IFAs that do not delve deeper into what is behind the information provided.
Taking this into account, the balance of responsibility of risk has always fallen on the side of the adviser not provider.
However this question of who is to blame when things start to take a turn for the worse has been thrown up into the air.
A settlement in court found that the provider, in this case Standard Life, was at fault and is responsible the loss of client money. The recent downturn in the markets has opened up the doors to a 'blame game', where clients who assumed their money was safe as houses have learnt the hard way that this is not always the case.
One of the reasons for this breakdown in risk profiling between adviser and provider is transparency on funds and the literature that is released about them. Without looking behind this literature, an adviser will not be able to see a fund's true colours and if it is appropriate for their client.
Having said this, I accept there are times, such as in the case of fraud, that an IFA can hand-on-heart have suggested a fund in good faith having carried out all the research on a product and the money will still disappear. But this is the exception and not the rule.
Inconsistency in risk profiling, and therefore what client's expectations are, is also an area where confusion can arise and where a firm's methods can be called into question.
Only a system and protocol across the board regarding fees and risk profiling will stand an adviser in good stead to take on the responsibility for each client's portfolio. Included in this system should also be documentation to ensure at each step that advisers have exposed clients to the appropriate level of risk.
The responsibility for risk should be shared between the adviser and the provider, but the adviser should accept that they shoulder more of the burden but this does not mean they have to be dragged down by it.
Digging behind product literature will lighten the load by ensuring the risk profile of each client is aligned to each fund invested in. Advisers should not be allowed to dodge this responsibility and with the proper systems in place it will feel more like a security blanket rather than a millstone.
Sheriar Bradbury is managing director of London-based Bradbury Hamilton
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