The proof of the advice guidance boundary review pudding will be in the eating

Take the famous ‘advice gap’, which has been the subject of much conversation in the advice profession for many years.

We’ve often been left confused with the oxymoronic relationship between actions and words from those who regulate us.

On the one hand, the regulator, governing bodies and business owners have been paying lip service to the need to close the advice gap.

On the other, the profession has been left feeling rather bewildered with the increasing complexity of new regulations on top of old and rising indemnity costs.

Who determines the ‘simplicity’ of a person’s circumstances?

I’m a firm believer that the regulatory framework has exacerbated the advice gap problem.

Any sensible business would invariably be left having to think very carefully about who they work with, to ensure there is a balance between client value and the firm’s ability to operate profitably and effectively.

Anything to streamline processes for those with simpler needs is most welcome and I wholeheartedly hope it leads to a greater exposure to advice and an ability for those giving advice to be able to do so with much less friction.

I would love nothing more than to spend more of my days helping people, rather than satisfying audit trails and ticking boxes. I would also love nothing more than being able to charge less to clients for such a privilege.

We could just be about to shove swathes of the British population into another descriptively labelled box

I have however, never believed that the perpetual introduction of new supplementary frameworks is the answer to solve the profession’s friction.

The inherent subjectiveness that comes with these frameworks could leave us all more confused than we started, trying to work out which framework a client falls under and worrying now about whether we picked the right framework, rather than whether we’ve satisfied the current framework.

Who determines the ‘simplicity’ of a person’s circumstances?

If they insist on only wanting one area of advice because it’s lower cost, who is liable if they misunderstood other areas of their finances that were far from simple and were never ‘holistically’ captured?

Ethics is fundamental

I have always firmly believed in a values-led approach to regulation and management, where a strict moral and ethical code is instilled in all entrants into the profession right from the beginning.

Ethics is a fundamental part of the training for legal professionals, whereas ours seems to be much more about navigating the complexities of rule books.

This leaves very little creative license for a financial services professional with a strong moral compass to do the best thing by their clients.

I hope the new regime goes some way in instilling a values-led approach, which will naturally improve consumer outcomes and a more harmonious working environment for those giving advice.

This I feel, could help close the advice gap alone on a more long-term basis.

But I fear we could just be about to shove swathes of the British population into another descriptively labelled box when we are all ultimately very different with unique circumstances.

What I, and I think many of my peers want to see, is some room to breathe, and be entrusted to operate our businesses and client interactions within our own strong moral frameworks, which will allow us to close this gap once and for all.

Two ways to achieve

There are two ways of achieving this in my view, that will have more profound positive impacts on the advice gap rather than new definitions, acronyms and process choices.

• Technology: Investing in, mandating and effectively utilising cutting-edge technology will assist productivity gains, accurate compliance protocols and free up space for financial planners to work with more clients, to bring the cost down for providing the service. I truly the hope the review gets under the bonnet of how technology can be used to safely and efficiently improve the access consumers so desperately need, without creating a divided system that migrates from ‘the haves and have nots’ to ‘the haves and have a little bit’.
• Values-led approach to regulation: Moving away from the ‘lowest common denominator’ approach to regulation. The vast majority of us go above and beyond the minimums required by our regulatory requirements, simply by valuing the work we do and the positive impact this has on the lives of those who seek our advice. Creating and fostering these cultures within firms and instilling these values in the training phase protects the profession and its ability to operate for many generations to come.

Forgive my skepticism, because I do think this is a positive step to start tackling the issue in question, but I hope the opportunity is seized to allow all stakeholders to flourish rather than leave a gaping hole filled with subjective interpretations.

Adam Cockerham is director and Chartered Financial Planner for William Dixon & Associates Limited