The Storm Financial collapse is a tragedy. Let’s not understate it. It’s a tragedy for those clients directly affected, many of whom will never recover from the financial and emotional havoc wrought upon them.
And it’s a calamity for an industry that’s been trying to convince the wider public of its professionalism and of the true value of the services it provides.
Don’t underestimate the impact that the Storm collapse will have on your business. Don’t assume you’re immune. In this environment, all financial planners are tarred with the same brush.
You may have good relationships with existing clients, but Storm has put a massive dint in the industry’s reputation.
It will reinforce the perception held by one segment of the population: that financial planners are a voracious, rapacious and venal group of commission-hungry, product-flogging cowboys. The Storm collapse will merely put this segment of the population even further out of the industry’s reach. You probably were never going to reach them anyway.
But the nature of the Storm situation means that another segment of the population – those who may have been ambivalent about financial planners but were coming around to the view that it might be worth giving it a go – will delay doing so, possibly for good.
And do not underestimate how severely Storm has undermined the FPA’s own Value of Advice campaign.
The Storm collapse neatly sums everything that Professional Planner has been saying, and railing against, since its inception in October 2007. It demonstrates beyond dispute that the system in which financial planners currently operate is fundamentally, fatally flawed.
When this publication was launched, its aim was to put forward cogent, coherent and compelling arguments for why product and advice have to be separated from each other, and why planners should be paid for the advice they give, not for the products that they sell.
Only then can the conflicts of interest that characterise the Storm collapse be effectively addressed. While the two aspects of planning remain fused, situations like Storm not only can happen again, but will happen again. And again. And again.
This is the first of four blogs by Simon Hoyle on why Storm proves that the commission system is fatally flawed.
Tomorrow’s blog: It’s not just planners who are addicted to commissions