Sea change on the way

Some of the advisers I come across in the course of my working life never cease to impress me with their unerring ability to maintain focus on their clients’ best interests. Many would argue that this is their primary responsibility, yet it is far from the sole activity required of them - and the multitude of external ‘distractions’ confronting advisers in 2012 threatens to be even more time-consuming than in previous years.

Each change has to be put into context, the implications for the adviser’s business weighed up, the likely impact on clients and client service evaluated and the new order implemented according to the requirements of the taxman, regulator or policymaker, while all along meeting the individual needs of the client. All of which might be quite straightforward were it not for the accompanying uncertainty.

Data from the City regulator has revealed that the number of directly authorised firms of advisers has fallen from a high of 5584 in September 2008 to 5482 at the end of 2011, while figures for appointed representatives have reduced from 9372 to 8590. This decline is far less than many had predicted following the announcement of the retail distribution review, but it is unhelpful at a time when the public is in serious need of professional financial advice.

Over recent years volatile markets have served to deter savers, a state of affairs that the UK economy can ill-afford with UK life expectancy for men standing at 78.1 and for women 82.1 years. Current personal investment levels are well short of providing adequate financial support for the majority in their retirement and old age and the state itself will not be in a position to fund the shortfall. Interestingly, some advisers have pointed out that it is the additional study that they have to undertake that is significantly eroding the time that they are able to spend with new potential clients who have yet to recognise the importance of developing a savings habit.

Public confidence is weak and the requirement for enhanced professional qualifications by the retail distribution review is in part designed to address this. It was therefore interesting to read that the British Standards Institute is consulting on the introduction of a new standard in the summer, BS 8577, aimed at advisers and banks involved in financial planning.

In a year’s time advisers will have a new regulator, the Financial Conduct Authority. In a spring cleaning exercise before that happens, the FSA is undertaking a review of small firms. The regulator will shortly be contacting a selection of firms to assess the risks they face and the processes they have in place to offset them. This ‘invitation’ is compulsory for those asked to participate, so the FSA has been running workshops around the country to ensure that firms can prepare in advance. This is mainly about the FSA checking its approach to monitoring adviser controls, processes, communications, training and the advice received by clients, but it lengthens the already long list of adviser ‘things to do’.