When it comes to what is stopping Brits from getting advice, you’ll hear a few refrains that might sound familiar.
“It’s awareness, and I don’t think we’ve had a regulator…the regulator almost frightened people and they talk about bad advice and what you need to be careful about,” Chartered Institute for Securities & Investment chief executive Tracy Vegro told Professional Planner during a visit to the association’s London office last week.
“There’s a jeopardy in taking no advice.”
As is the case with our local advice associations, the CISI has played a key role in simultaneously trying to grow the profession while upholding high professional standards.
“As long as you take advice, and you think about how you utilise that advice, and use somebody that is professionally qualified – I would argue that, wouldn’t I, as a membership body that sets its qualifications – I would say the detriment of not taking advice is far greater,” Vegro said.
Chris Morris, the group’s head of financial planning policy and engagement, said there is a current and well-recognised advice gap in the UK.
With close to 30,000 regulated individuals giving advice, the UK doesn’t even have twice as many advisers as Australia has, despite having more than double the population.
“One of our objectives is to encourage the next generation to come through to give financial advice, because we have got an ageing population here,” Morris said.
Both Vegro and Morris said the impact the Retail Distribution Review – which ushered in higher education standards and banned commissions, much like the FOFA reforms did in Australia – had on parts of the advice sector.
“When something like RDR comes in you will naturally get some people that call it a day because they don’t necessarily want to upskill, but it wasn’t the only thing that led to a reduction in advisers,” Morris said.
Vegro said there’s sense regulation led some advisers to wind-up their businesses.
“If it’s in terms of what your intention was – to make sure that more got advice – we probably needed to have a different narrative around that, as the regulator…certainly frightened people off,” Vegro said.
She added the industry hasn’t been vocal enough about advice and the size of the potential market it could serve.
“We tend to not want to talk about financial planning, it’s one of those subjects that’s slightly seen as not something you talk about,” Vegro said.
“The high-net-worth individuals are quite happy to talk about wealth management, and you have lots of people who are struggling with debt who seek hep through things like Citizens Advice services here in the UK.”
Citizens Advice specialises in advice on debt, housing, legal and consumer issues, with a limited scope for financial advice.
“The kind of people in the middle, the people who are working but not really thinking about planning their retirement, that’s an area that we think as a professional body we can do a lot more to utilise the people that we’re giving qualifications to,” Vegro said.
On duty
The most recent high-profile regulatory challenge for British advisers was the introduction of the Consumer Duty which commenced on July 1 last year.
The Consumer Duty requires that “firms must act to deliver good outcomes for retail customers”, and targets accountability at all levels of a financial advice business, not just licensed advisers.
If the phrasing sounds vaguely familiar, Quality of Advice Review lead Michelle Levy noted the UK advisers’ duty in her final report as being influential to her creation of “good advice”.
Morris said the core objective of the Consumer Duty was to improve client outcomes.
“I’d argue the good financial planning firms were doing a lot of what the Consumer Duty requires anyway, but it’s perhaps bringing the wider profession and also applicable for the whole advice chain,” Morris said, noting product providers are also required to abide by the duty.
“[The duty] is making sure those giving advice are able to utilise the knowledge they have and effectively plan for clients. RDR was more about testing and assessing technical knowledge. Consumer Duty is perhaps a bit more about applying that knowledge and being a better adviser.”
The Consumer Duty is principles-based, but the regulator had to issue guidance after a review that outlined where it felt firms were not living up to expectations.
“From my point of view, it’s one of those things regulators introduce quite a lot and they seem to think that it will effortlessly get adopted, but it’s got people quite worried, so it gets the same as with the RDR – you get people saying I don’t want to operate in a world like this,” Vegro said.
“But equally, for a body like ours, it’s helpful for us to say ‘look, we’re offering you help with that’.”
The duality of associations
Facing a similar conundrum as associations in Australia since the Hayne royal commission, the CISI must also balance advocating for the profession with making sure its members meet high standards.
“It is the big, big question,” Vegro said.
“All the time what we try and do is make sure that we are listening to our membership.
“I say to any regulator – and I talk to them a lot – you can’t make it so extreme that no one wants to enter the market to provide a service because that’s the biggest problem of all. We’ve come a long way through bodies like ours and things like the CFP certification.”
Vegro notes that CISI works with Australia’s Financial Advice Association and with the Financial Planning Standards Board, which promotes global advice standards, as well as other national advice bodies to better co-ordinate how to best raise industry standards.
“People are coming to us and saying can we take some of your materials and we’re really happy to do that,” Vegro said.
“You don’t have to solve the problem all in one, you can learn from others. That’s where the role of professional bodies comes in, we can actually work really well. In a way, if we do that kind of collaboration and you do it globally. It’s a global world. Many people are not moving firms, they’re moving countries.”
Vegro said if a standard framework for professionalism in advice is viewed in a holistic fashion globally, it can help create a structure that can be replicated across markets.
“The more we can look at it in a slightly more holistic fashion, it helps the regulator do their job and it keeps the cost down, because somebody has to bear the cost of regulation,” Vegro said.
“I’m always surprised by countries that are doing more to ramp it up, that they don’t factor in more explicitly what other countries like the UK have often learned about what is the cost/benefit then. At what point does your regulation become so unaffordable to the consumer they just don’t do anything. It’s a perverse or unintended consequence.”
