Confusing the Ends with the Means

There is a real danger at the moment that we are confusing the ends with the means. Most discussion is very much focussed on the means – RDR, qualifications etc and very little on what we are actually trying to achieve. My own views on this can be summarised (off the top of my head) as:

Ends

People are financially aware and their financial needs met
People trust, and seek advice from, financial advisers and planners when appropriate

Means RDR is deploying

Higher qualifications (trust)
Removal of commissions (trust)
Capital adequacy requirements raised (trust)
Money Advice Service? (aware)

Means RDR is missing

Marketing the above (aware, trust, seek advice)

Means which may damage ends

Higher qualifications (seek advice, due to reduce adviser numbers)
Removal of commissions (seek advice, due to increase cost of advice)
Capital adequacy requirements raised (seek advice, due to increased cost of advice)

I’ve put in brackets the ends which I think the means are trying to address. This is not an exhaustive list but hopefully makes the point.

There were always going to be trade offs between increasing professionalism and the problems it would cause, and the debate will continue long and hard about these. It is clear that as advice businesses move to a post RDR model, most will look to focus on wealthier clients. Charging a percentage of assets make this inevitable. Charging an hourly fee at around £200 on average is unlikely to increase access to advice to a wider part of the population, and the outlook for simplified advice is bleak. So whilst more may understand the value of and seek advice, fewer will obtain it.

The biggest blind spot is marketing the benefits to customers and other professionals. I don’t see any real plan for this. Much of the FSA’s budget (I assume) has been spent on promoting it’s Money Advice Service, but that’s not something which promotes trust in financial advisers. It may improve financial awareness and understanding (plenty to suggest it won’t) but given the huge changes imposed by the regulator on the IFA community to demonstrate professionalism, it’s surely worth some reciprocal support through a visible marketing plan as a minimum.

It feels like we, the advisory community, are being left to do this job ourselves. With no collective marketing resource and plenty else to be doing in the run up to RDR, there is a very high probability that the whole event will make no difference whatsoever. Advisers may well end up with better businesses, wealthier clients and fewer complaints, but this was the direction of travel for many firms anyway. It isn’t going to make a damn bit of difference to the ends outlined above, and advisers will not have new clients forming an orderly queue for “professional” advice. This outcome can be guaranteed, because those potential clients don’t know about it. We’ll never know if it made a difference.

On a pragmatic level I don’t believe that the regulator or any trade body will change this. And there is no way the IFA community is capable of pooling millions into a collective marketing campaign. A start could be to treat professional introducers as the clients we need to convince about why we should be trusted, and use them to open the door to new clients. If we can’t convince them that all this effort makes us trustworthy, then we should accept we’ve just got it completely wrong. There are plenty of advisers who won’t care one jot about any of this, as they have great businesses with plenty of clients already, but for everyone who has had to slog long and hard through the past six (yes, six) years of RDR, I would like something significant to change, something more than the sum of it’s parts. Just to make it worthwhile. If we don’t tell people about it, we’ll never know if it was.

See also RDR: a meaningless title

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  • http://twitter.com/Cunningham_UK Alistair Cunningham

    Why does banning commission increase cost? Surely with greater transparency costs will decrease? I also wonder if the same is true of our requirement to have more cash in the bank?

    • http://www.threesixtyservices.co.uk philyoung

      Over the long term it may do, but as most customers understood advice to be free historically, their perception is that costs will go up and this will inevitably put them off. Perception will drive that outcome. Advisers having more cash in the bank will also improve trust longer term, but it will drive some advisers out in the short term. This isn’t a reason not to do it, just a possible negative outcome that works against increasing access. The key point I am getting at is that we can argue these points all day but nobody is bringing any of it to the attention of the general public which makes it a futile gesture if we don’t act on it. I do take your point that there are many ways all this could play out, positively and negatively.

  • Phil Billingham

    I’m sorry, I know this will sound weird, but this is brilliant. Spot on. Wish I’d said it myself.

    “….there is no way the IFA community is capable of pooling millions into a collective marketing campaign. A start could be to treat professional introducers as the clients we need to convince about why we should be trusted, and use them to open the door to new clients. If we can’t convince them that all this effort makes us trustworthy, then we should accept we’ve just got it completely wrong”