There have been a number of reports recently which, while seeming to be unconnected, carry a common ...
There have been a number of reports recently which, while seeming to be unconnected, carry a common message. One such report concerns the British Chamber of Commerce in Thailand encouraging self-regulation of financial advisers. Back in the UK, coverage of the domestic regulatory change is ubiquitous as we approach the end of polarisation and in Hong Kong, a major international IFA firm has stated that it will compensate clients who were sold GOT and GDT hedge funds.
Across the board, each of these individual reports has a common thread of ensuring clients are adequately protected in the area of financial services. International advisers need to be increasingly aware of the potential impacts of compulsory regulation on their business model, in order to plan in advance and take appropriate action.
It is nearly 20 years since we saw the imposition of regulation in the UK, which as an industry we have struggled to come to terms with ever since. In those early years, many financial advisers left the UK to become international financial advisers to avoid the new regime of regulatory compliance - both administrative and financial. Often seen as a burden by advisers, regulation has increased inexorably with each new financial scandal - pensions, split caps and endowments. However, the UK is not alone. There has been increased regulation in the Channel Islands and Isle of Man and further afield in some Middle Eastern territories. Elsewhere, we have seen regulators flex their muscles more and, more particularly, in Hong Kong, Singapore and South Africa. So, there is every reason to believe that this trend will continue rather than reverse, as increased client sophistication ups the demand for financial advice. The consequences of this will inevitably mean an increase in operating costs, administration and changes to the business environment.
It is tempting to see regulation as an imposition on the adviser who is simply trying to provide a good standard of service to his or her clients. So let us assume that there is an upside? Well when viewed more positively, a regulated market provides an environment that encourages best practice - helping the adviser to run their business more efficiently and effectively - (certainly UK compliance officers would see their role in this way). Nonetheless the financial services industry in the UK has not yet seen the benefits of compulsory regulation filter through in terms of improved reputation.
In the business planning process it is wise to plan for increased regulation either as a threat or an opportunity in the medium to long-term. In doing so, thought may be given to the possibility of negating the threat by encouraging self-regulation and increasing the opportunities that arise from improved client confidence. If sufficient like-minded advisers can get together, as has happened in Thailand, then there is a real possibility that self-regulation can work. Minimum standards of education, requirements for 'knowing your customer', issuing terms of business and rules on financial promotions - these should be part of the 'best practice' of all advisers and will lead to increased client satisfaction, reduce the need for government regulation and ultimately increase profitability.
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till