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If like me you think that it is important to protect clients through a robust regulatory regime but that the one we have has just go too top-heavy, perhaps we can convince the new Financial Conduct Authority to massively simplify the conduct of business rules?

It strikes me that a very simple set of rules is required and the chances are most IFAs are already following these.

After all they make real sense from the point of view about how we present our services to clients.

Have I missed any? Are any of them less than SMART? Could the following form a checklist that IFAs might follow?

1 You must clearly disclose your status to the client and explain what that means.

2 You must clearly describe the services that you offer in respect of advice, implementation and review services.

3 You must ensure that you know your customer (assets, liabilities, income and expenditure) before you provide them with any advice.

4 You must identify your clients financial planning objectives and goals before providing any advice to the client.

5 You must identify your client’s attitude to risk (risk tolerance, volatility tolerance and capacity for loss) before you recommend any savings or investment product.

6 You must demonstrate and document the suitability of your recommendations before you ask your client to enter into any investment or savings product.

7 You must clearly describe all charges (including your firm’s charges) applicable to your client in respect of any investment or savings plan you recommend.

8 You must clearly describe the risks associated with any investment or savings plan that you recommend to your client.

9 All recommendations to clients must be pre-approved by the firm before they are provided to the client.

10 You must create sufficient records to demonstrate that you have fulfilled the above rules.

It would then be very easy for anyone (clients, regulator, peers) to test whether these rules were being followed.

I fully accept that different IFAs will apply different levels of intensity to the delivery of these rules and the documentation of them but that will be about choice and there isn’t a right or wrong way to do this.

Could regulation be that simple? I look forward to hearing your views and comments.

A group of MPs, industry “figures” and others have written a letter calling on the FSA to review the impact the RDR will have upon access to advice for the poorest group of consumers, those at retirement with small pension pots.

“The signatories said the RDR will lead to the poorest pensioners failing to receive financial advice, resulting in less retirement income”

I assume this is thought to be the case because of the abolition of commission? If that is the case then it is nonsense as a simple case study can demonstrate.

It is the 1st March 2012 and a client with a personal pension fund of £20,000 decides he wants to take his benefits.

Sensibly he pops in to see his local Independent Financial Adviser. That adviser goes through the ”know your customer” exercise, carries out anti- Money Laundering checks, does some investigation and research and discovers that by exercising the open market option the client can get a better annuity elsewhere having taken his entitlement to the £5,000 much loved tax free cash lump sum.

The balance of his pension pot £15,000 is used to buy the annuity. The adviser is paid £150 (1%) in commission by the annuity provider and this cost is taken into account in the calculation of the annuity rate.

So what changes?

It is the 1st March 2013 and a client with a personal pension fund of £20,000 decides he wants to take his benefits. Sensibly he pops in to see his local Independent Financial Adviser.

That adviser goes through the ”know your customer” exercise, carries out anti- Money Laundering checks, does some investigation and research and discovers that by exercising the open market option the client can get a better annuity elsewhere having taken his entitlement to the £5,000 much loved tax free cash lump sum.

The balance of his pension pot £15,000 is used to buy the annuity. The adviser is paid £150 (1%) in adviser charging by the annuity provider and this cost is taken into account in the calculation of the annuity rate.

What changed? Absolutely nothing!

Now frankly I can’t see how anyone can make any profit by advising on this but it may simply be that those advisers who do this kind of work are not in business to make profit. (Not quite sure how it is they survive-unless there is massive cross subsidy taking place from some other part of their business model)

So perhaps the complainants are not actually asking for this regulatory review because of the abolition of commission perhaps they are asking for it because they expect there to be significantly fewer advisers around post the end of the year?

Well, if that is the case I think they are probably wrong.

I suspect there will be fewer advisers but not quite the attrition rate as is being suggested by some doom-sayers. And I still hold the view that other distribution mechanisms will kick in to provide the gap in advice- remote advice for example.

I am pretty sure if you asked firms like Annuity Direct Ltd they have capacity to do a lot more work to the high standards that they have. And this type of firm may well be able to make profits from low value, high volume activity.

On Tuesday 28th February I presented a webcast for Thought leadership Live on the subject of the IFA Proposition.

I described the issues that an IFA might consider in designing a client proposition that would be valuable to and valued by the client and also described the way we designed and implemented our proposition not as a “you must do it this way” but simply as an example.

Webcast viewers were kind enough to pose some questions live on the day and time constraints meant I was unable to devote enough time to provide a full answer so I hope that the following is more helpful.

Do you think that IFAs should continue to choose funds?

Yes. If they have the resources to properly research the market and are confident in what they are doing.

I would also say “yes” if this selection of funds is part of a robust process for delivering investment advice.

We have a six step process starting with identification of client financial goals and objectives, moving on to a thorough analysis of a client’s attitude to risk, reward and volatility and importantly their tolerance or capacity for loss. We then use our strategic investment asset class models to build a diverse portfolio of asset classes.

These are then tactically adjusted based on what is going on in the world but without an attempt to “time the markets” our tactical adjustments tend to be quite modest moves rather than wholesale change. Then we move onto product and fund selection to match the earlier identified goals and objectives and to fit our models.

Unsurprisingly we recommend regular reviews to ensure client goals and objectives remain on track.

So yes I do believe IFAs can and should continue to recommend funds.

What’s your view on the future of networks? Should IFAs move direct to have full control over their process and proposition?

I have no first hand experience of being part of a network but I suspect they don’t stop the IFA having control over their proposition but they may well insist on certain processes taking place.

I can tell you that I don’t believe direct authorisation with the FSA is as difficult as some people make it out to be. The FSA Conduct of Business rules and the guidance and information flows through thematic reviews and the publications they issue are pretty straight forward.

I do sometimes think (with the greatest of respect to them) that Compliance Officers/Departments seek to make it more complex than it actually is. I recently wrote up what I think future regulatory client facing rules should be for an IFA and it came to less than one side of A4. I may publish them here on BrilliantWithAdvice for reader feedback?

So in summary it may be that full control over proposition and processes for delivery may be easier to do if you are directly authorised.

What made you initially decide not to venture into the group pensions area? I would be interested to hear your views

We used to be in this marketplace before 2004. Today we do very little and usually only for existing clients although we do occasionally take on small new schemes, for example when an SME owner who is a client asks us to.

Our business change process identified that we had more relevant skills, experience and qualifications to deal with individuals in the key areas of advice and financial planning. This resulted in a gradual but progressive move away from the “group market”. Other IFAs may be better placed to work in the group market than we are.

For any significant group activity we outsource to a very good employee benefits firm.

I’ve been to proposition workshops where suggestions have been made to have 2-4 set propositions. Your approach seems to be more fluid, so are there some set “Gold/Silver/Bronze” type propositions you use or are there more which you decide on after meeting the client?

We really have two initial propositions, a suite of seven core advisory offerings and LifeWealth Design our Financial Planning offering. These then result in clients who want us to look after their pension or investment portfolios.

We have three review service standards which are frequency of contact based. We call them Premier, Membership and Foundation. These are internal titles our clients don’t get told they are “Premier” clients for example. The delivery of review reports is in content terms exactly the same a very detailed and valuable report. The number of face to face meetings is the variable.

So I would say we do only have two advisory services and one review service, this means our systems and processes can be quite simple and not too over engineered.

When you have a proposition together what’s the next way to articulate it to potential clients?

Articulate it consistently in every thing you use to promote it to the client. That might be a brochure, a “big Picture presentation like we use, your website, your newsletters etc.

The key challenge for any firm with more than one person is to ensure that the proposition is consistently presented. That adds to brand value. If everyone is telling their clients that they do something different then chaos will start to take over!

What you say to clients should also reflect what you write to clients. Most importantly clients like to know what the journey looks like. Show them the stages of the delivery of planning, advice and wealth management. It also helps staff to know what the journey looks like and they can then see what their job does to help the client.

What do you mean when you say “advice would be delivered by other mechanisms rather than seeing a reduction in access to financial advice”?

I think there will be some IFAs who choose not to be around post RDR and some who don’t “make the cut” That is a natural part of the evolutionary process and whilst I empathise with some of them there is also an element of “self de-selection of the IFA gene pool going on”.

Nature abhors a vacuum and I never underestimate the power of the Internet as a device for delivering bespoke advice to a large segment of the UK population. The argument that “no one has been able to do it so far!” simply adds weight to the prospect that someone will. I believe there is a fantastic opportunity to deliver remote (note remote not on-line because I think it is the combination of physical documents, email, telephone and video that will be used) advice in some key financial advice areas.

The agreements that you have with specialists in business areas you don’t want to work in – are they financial arrangements or mutual referral based? Is this affected by the RDR?

Good question and well timed with the FSA Guidance consultation on independent and restricted advice being issued this week. We do not have commercial arrangements with those to whom we introduce. What we are looking for is quality advice and service to the clients we introduce. We are fortunate to have found really good people to help us with the delivery of advice in areas where we do not operate.

It is not affected by the RDR.

This morning I had a session with my colleague Andrew Neligan who is our Financial Planning Director in preparation for a workshop we are running with Solicitors in Guildford next week.

The session is about the use of Social Media as part of the marketing mix that a professional firm might employ to attract new clients.

We wanted to do something that demonstrated that as well as being competent financial planners to whom they might introduce suitable clients, we had a few more strings to our bow.

We have certainly found the interaction between our social media activities and our website to be an effective way of attracting the right kind of client.

In 2011 some 22% of our new clients found us as a result of an Internet search.

Anecdotal evidence confirms that 100% of new clients “check us out” by visiting our website.

So, for us, our website has become a place where we can post, opinions, guidance and information and this helps to reinforce our brand values.

It all starts with a blog and our team blogs on a multiple basis every day. We then link that blog into our social media campaign via Twitter, Linkedin and Facebook- all automated and with minimum of effort.

Our best weekly blogs then form part of the content of our weekly ezine newsletter. This means the same message can reach different audiences and one piece of effort can be used in multiple locations.

The obvious reason for doing this is to optimise the search engines so that people can more easily find us.

So why are we doing this session for local professional connections? Simply because for us part of our brand needs to be that we are different.

We want to stand out from the crowd and doing things to help our professional connections means that we can be seen as different.

So if part of your marketing mix is to develop relationships with local professional connections what do you do to stand out from the crowd?

Book your ticket for our Implementing the Retail Distribution Review workshop today!

You could be forgiven for believing that qualifications don’t matter to the financial intermediary.

We often read that “clients don’t understand them” and that “experience is more important” Citywire (New Model Adviser) are running a piece at the moment suggesting that the professional connections that we are trying to build relationships with are not really concerned about the level of our qualifications.

I agree that clients don’t understand our qualifications but that is usually because they are not explained to them, or more precisely the value of dealing with an adviser with suitable qualifications is not explained.

What I also think is true is that they don’t understand what the designatory letters mean.

Again, who can blame them for not understanding, what is needed is an explanation.

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I also don’t believe that experience is more important than qualifications. But then I don’t think that qualifications are more important than experience either.

Seems a simple truth to me that what matters is having both as long as they are relevant. In the same way that some qualifications are not relevant well some experience isn’t either.

And why in any event would they be mutually exclusive? Why can’t advisers have both and then overlay those with application of skill in an environment of integrity and honesty?

I suspect there may be a degree of laziness here (that is going to get me into trouble!); not laziness in not doing the exams but laziness in not articulating to the potential client why the IFA effort of getting those qualifications adds value to the consumers life.

It seems that it is “everyone else’s” job to communicate the value, I think that is my job.

This week we were really pleased to get to the position of having every one of our nine Financial Planners getting their Statement of Professional Standing (SPS). I guess there are two possible things that we can do with those SPS certificates.

We can print one out and stick it on our T&C file as evidence of achievement for regulatory purposes (we are going to do that by the way!) or we can tell the world about it, tell our clients and tell our professional connections.

If like some of the bloggers on the Citywire New Model Adviser site you believe that clients and professional connections don’t value higher qualification standards, then you might think that is a waste of our time.

Alternatively it might just be a competitive edge that we can exploit.

What do you think?

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