Orlando is renowned as the gateway to the Magic Kingdom theme park; however, for four days earlier this month it was also home to the annual meeting of the Million Dollar Round Table (MDRT). With 60,000-plus members from more than 70 countries, MDRT is the world’s premier association of financial advisers and in excess of 13,000 people travelled to Florida to exchange ideas and to learn from inspirational global speakers.
The way in which financial advice is delivered to clients varies substantially across the world and this year it was noticeable that while some nations, particularly those in Asia, still operate in a relatively unregulated environment, in many parts of the world regulation is significantly increasing. In America, commission disclosure has just been introduced.
I participated in a panel discussion with a speaker from Australia and another from the US examining the challenges of transitioning from commission to fees. Both the other panellists had made the transition ahead of this becoming compulsory and spoke of their positive experiences, particularly in terms of being more professional and building capital value. However, the minimum fees they now have to charge (more than £1,000 and £2,000 respectively) are such that most ordinary consumers can no longer afford to deal with them and vice versa.
It was equally clear from the debate and the subsequent questions that, as has happened in the UK, regulation will ultimately lead to an advice gap followed by deficits in protection and savings. I shocked the audience by explaining that since UK regulation started in 1988, the number of advisers has dropped from 250,000 to fewer than 25,000. About 80 per cent of UK life companies have also disappeared.
These figures ought to prompt the FCA – and regulators across the world – to reflect that trying to create a perfect regulatory framework carries the danger of throwing the baby out with the bathwater.
I believe regulators should keep in mind the fact that too much regulation is both costly and counterproductive. Without proper access to advice, consumers will save less and have less protection.
I therefore urge regulators across the world to balance consumer protection with common sense, so as to ensure the continuation of a strong and economically viable advice sector. If they do not, no amount of Disney magic will protect consumers from the twin dangers of dying too soon or living too long.
Ken Davy is chairman of SimplyBiz
