Advisers mull merits of vigilante approach to ‘bad apples’

Paraplanner sparks debate as he looks to clean up advice industry from within

Photo by Thomas Kelley on Unsplash

A paraplanner who has penned a blog on his decision to become an adviser in an effort to address problems he sees with the client-facing part of the industry has prompted a discussion about how much of a role the industry should play policing bad apples.

Plan Work owner and director Nathan Fryer published the blog last week and wrote that he had had to produce reports for advisers “that you would not wish on your worst enemy”.

Fryer described “recommendations that quite honestly made my blood boil and things that just made me want to contact the end client directly and tell them that the advice that is being provided is just plainly only in the interest in the adviser recommending it.

He wrote: “Having non-disclosure agreements in place prevented me from not only doing what I wanted to do but also from whistleblowing without protection against potential future litigation.”

While the blog pointed some criticism at the Financial Conduct Authority, it also pointed to the need for the industry to work together to “come up with a better way to rid the industry of the rogues”.

Taking ownership of the industry reputation

In the blog, Fryer was even handed in his take on the regulator.

He says: “I agree with some advisers that the regulator is using a sledgehammer to crack a nut unless we can collaboratively work together to come up with a better way to rid the industry of the rogues.”

CWC research’s managing director Clive Waller says he agreed completely with Fryer’s sentiments and the blog was “brilliant.”

“I have received huge flak from mostly anonymous advisers because I have commented on bad practice and mis-selling,” Waller says. “It is great that Nathan is so open and honest.”

Advisers should be responsible for exposing bad apples, he says. “They must take ownership of their trade which means joining a trade association and taking part in industry committees, as well as behaving in a professional manner.”

‘Few of us have much faith in the FCA’

But the FCA did not escape the blame for the industry’s rogues.

Darren Cooke, chartered financial planner at Red Circle Financial Planning, says: “Frankly few of us have much faith in the FCA, they make rules but there is little follow up, it is too easy to slip through the net and give poor advice as there is little to no enforcement.

Cooke says: “Its like having speed limits on roads but no police or traffic cameras to enforce them, the only time you would get caught is when there is an accident.”

Fryer acknowledges regulation can feel like “it is being implemented to make the lives of smaller adviser firms harder to operate”.

He wrote: “More regulation may not be the answer. I feel better enforcement is, but the FCA most likely have the same budget pressures as the rest of society, so we need, as a profession, to come up with another way of policing the bad ones.”

Waller also criticises the FCA, stating they micromanage processes in the industry using regulation such as PROD (Product Intervention and Product Governance Sourcebook). “Sadly, FCA writes loads of papers and thematic reviews but only regulates in the rear-view mirror.”

Others echoed some of the more sympathetic comments Fryer made about the FCA. Tom Kean, director at Thames Financial Planning says the FCA has an “impossible job” but it’s not a reason to give up.“Mifid II is a great example of trying very hard to simplify but getting it totally wrong with numerous unintended consequences. The net result is confusion and a further degradation of trust.

“The FCAs laudable efforts to try and create a culture of upstanding ethics sounds good, but most people I talk to recognise it’ll have little chance with people who have dubious morals to start with.”

Kean says “there is a danger we are tarring everyone with the same brush here”, because like many industries, there are some fantastic professionals and dreadful ones in equal measure.

Outsourced paraplanners may see the worst examples

One financial planner questioned whether the examples of advice seen by a paraplanner might be different depending on whether they’re inhouse or outsourced.

“Personally, I need to work closely with my paraplanner, so that we understand the client together and, respectfully, challenge each other,” says Thomas Skinner, director and financial planner at Barnaby Cecil Financial Planning Limited.

“It should be a collaboration. If a firm is willing to outsource such an extremely important relationship within the advice process, it might suggest they want to report out the door so they can move on to the next.”

Cooke, who used Fryer as his paraplanner, said he told him from day one his role was not to be an “order taker”. “If he thought the advice I was proposing wasn’t right or there were better options he should, and occasionally did, challenge me. At the end, it is my advice and I am responsible for it so I had the final say but I always knew that if I tried to do something stupid Nathan would walk away.”

If more advisers were open to this relationship and taking responsibility at the end, it would work well for the culture overall, says Justin King, chartered financial planner at MFP Wealth Management. “If an adviser gets an answer from paraplanner which conflicts with what they would want to recommend, this should still be documented, whether it’s an inhouse paraplanner or an outsourced freelance paraplanner.”

King said the conflict is that the paraplanner is saying one thing and adviser is saying another, which is inevitable in any profession or industry, but this does come down to culture of organisation and the adviser or senior team who are take to responsibility.

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