Has there ever been a better time to be a financial adviser?
I have been working in this industry for several decades and cannot recall a time when the role of the financial adviser has dominated to such an extent or has been in such demand.
Our profession operates to higher regulatory and compliance standards than at any time in the past and, while this carries frustrations for individual advisers, the overall impact has produced a landscape which has led to a huge uplift in professional advice standards.
It has also led to a surge in demand for financial advice thanks to greater pension freedoms where accrued pension pots can, with careful planning, be passed on to the next generation.
As a result the wealth sector is booming, assets on platforms are growing significantly and the outlook in terms of consumers requiring investment advice is positive.
In addition, we have auto-enrolment beginning to catch on and this too is going to open up future potential clients seeking advice.
Meanwhile in the mortgage market, financial advisers reached a new high in 2016, with adviser-controlled mortgage submissions taking around 70 per cent market share.
Helping clients to understand risk
Compared to their wealth cousins, it could be argued that mortgage advisers have had a relatively lighter touch from the Financial Conduct Authority (FCA).
While business is booming in the wealth sector, there has been significant regulatory obligations placed on this community when advising investment clients.
Among these obligations is the necessity for advisers to ensure that their clients properly understand investment risk, volatility and capacity for loss. This is not a simple task.
In addition, advisers are obliged to conduct regular due diligence on chosen platforms and, if they outsource their investment function, on discretionary fund managers.
By comparison, mortgage advisers can arrange a mortgage (debt) but have no real duty of care obligation to highlight the risks involved to the individual through illness, death or redundancy.
This strikes me as a contradictory position where we have the FCA ensuring in one sector that the customer understands risk, while in another sector of the same market there is no such requirement.
It seems to me that this is unsustainable and there is likely to be a similar raising of the requirements in the mortgage arena in the years ahead.
Now many mortgage advisers – and I know this from first-hand experience – already conduct a remarkably thorough exercise by taking their clients through the whole risk journey when advising on a mortgage. Risk education is a central part of their advice and business proposition.
I see the future mortgage advice business as one which advises across all the risks associated with taking on debt, much as the investor needs to understand the risks they are being exposed to in the investment markets.