Is your adviser advising or selling?
Consumers’ inability to answer this question, though often their own fault for not even realising why the question matters, lies behind much of their poor experience of dealing with the UK financial service industry. Speaking at the Institute of Economic Affairs, FSA Director Stephen Bland said last month that its Retail Distribution Review consultation has thrown up a consensus around a clearer distinction between selling and advising.
Because No Monkey Business recruits from the IFA market (the only place the required personal finance qualifications can be obtained), I keep an eye on the job ads in the trade press. Virtually all the positions for financial advisers refer to basic salary and ‘substantial’ bonuses. Bonuses alone do not imply that the job is really about selling but the size of potential bonuses relative to basic salary does. Over the Christmas break I searched for all ads that quantified both the basic and the ‘Over Target Earnings’, or OTE. The average uplift from these incentives was 2.4 times and the minimum uplift 1.4 times. Could these really be incentives for good quality advice or client service? Of course not. And what were these positions called? All fell into these categories: financial adviser; financial planning consultant or specialist; wealth management consultant; client manager or relationship manager. It looks like Mr Bland is right: we simply do not say what we mean or mean what we say.