At a recent workshop I heard one participant say that they thought ‘we all want advice to be a profession and if we got together for an hour or two we would all have a pretty clear idea of what that is.’ Sadly, I beg to differ, and there are many different points of view.
One person will tell you that the essence of professionalism is independence, defined as freedom from conflicts of interest. In this world a truly professional financial adviser cannot receive anything other than fee income from the client. Obviously, they cannot be the employee of a financial service provider.
Another will tell you that the essence of professional advice is providing a wide-range of products – even the best product available, from a seemingly unlimited universe. There is a strong component of this in the recommendations of the Trowbridge report, perhaps unusually, many financial advisers that provide advice on insurance products feel the same way.
Our current Financial Advisers Act and AFA Code place suitability assessmentat the heart of advice and have no specific prescriptions to make on either commissions or range, apart from insisting that they are both clearly disclosed. This is a view I have a lot of sympathy with. Some take it to the point of insisting on a degree-level qualification.
Some will insist on all of these, and perhaps they are the true purists: no conflicts, unlimited universe, state-of-the-art suitability testing. In such a world very little financial advice would be given. While this debate rages I occasionally look around and see how other professions are managing. An article I just read explains how one professional adviser forgot about something and it left his client severely, permanently, disadvantaged – far more than any action of omission on your part could affect your clients – his penalty? Merely censure. You can read of another professional who admits lying about all sorts of things, including employment history, work performance, and criminal past, arguing for just a two month suspension.
So maybe on one front financial advisers are already well ahead of some other professions: the penalties for failure are personal and they are real.