by Tony Vidler
For all the distractions, downtime and inefficiency that comes with new (or more) financial services regulation it is very easy to see it as an imposition. Many advisers conclude that regulation is simply bureaucracy which in itself creates little to no value.
I am no fan of meaningless bureaucracy, but regulation is in general terms a good thing for us. Probably we need it more than ever before actually.
I would be the first to agree that often the practical implementation of good regulatory intent is downright clunky and frequently shows a distinct lack of understanding about how advisers and consumers actually interact. There is also a particularly strong tendency on the part of the theorists proposing the rules to be impractical and idealistic. They often imagine some utopian society where consumers willingly read reams of documents and would prefer to engage in a process of receiving professional advice which involves countless meetings, an abundance of correspondence, and constant reinforcement via external sources that the advice being tendered is both relevant and good.
Perhaps that is because this is how academics usually like to make decisions.
Most consumers out there in the real world juggling jobs, kids, money worries, aspirations and all the stuff that sucks time from them seem to want to engage in the advice process differently. Quick, convenient and “to the point” actually seems to matter to a lot of them.
Our challenge as an industry (nor just the advisory side of it) is to find the appropriate balance between delivering professional services in a manner which the consumer prefers and is willing to pay for, and the need for common standards of behaviour and expectations which protect society as a whole (including the advisory side of the industry).
If we are honest there is no argument against the purpose of regulation from most career professionals. Regulation fundamentally is intended to raise consumer confidence in the sector. It intends to promote transparency and trust. It intends to achieve this by ensuring there is a layer of safety for all participants and parity of information. It intends to raise professional standards to ensure that the practitioners can have confidence in their own profession as much as anybody else can.
These are good outcomes for every stakeholder in the industry. Personally, I don’t much like the idea of having people in the business who do not want those outcomes.
And so we have regulation to improve the business environment of an industry through intervention because the sector has been unable to achieve these goals itself.
That might not be how we like to see our own industry, but we have to accept it as a truth: we do not universally enjoy consumer trust and confidence. People are not flocking to use either the financial products or to obtain advice about whether they should use them. Virtually every financial adviser comes across work by other advisers that causes them to shudder: issues abound still with a proportion of the industry’s behaviour, ethics, or technical competency. These are genuine issues despite the overall lift in ethics and competency across the majority of the industry in the last decade.
This is where we (the advisory side of the business) need to get with the program. Career professionals want the same outcomes as the regulators. We perhaps disagree quite often about the best way to achieve the objectives, but we actually want the same result. If we want the same results but have different perspectives on how best to achieve them, then we are best to communicate and work with regulators and educate them on how rules can best work in the field. In dialogue and co-operation there are likely to be workable solutions to be found.
It is potentially a red-flag danger-signal for the sector when we see industry participants adopting a confrontational, aggressive or dismissive approach to regulation. Sure, rules can be limiting and pain in the backside….who doesn’t want to drive at 140 km/hour somedays on a fine road with great vision ahead? However the rules limiting and governing our driving speed to no more than 100 km/hour are there to ensure a reasonable degree of safety for ourselves, other users, and society as a whole. That is a noble objective, and to achieve it requires a little compromise from all parties.
Soon we will have another round of proposed changes to the standards and rules of the game, and they will undoubtedly be influenced by the experiences of consumers interactions with the industry in a number of jurisdictions in the last year or two. The problems in standards in the industry are not isolated to one particular sector, or one particular country. There have been too many bad headlines (totally warranted as well) signifying systemic flaws to think otherwise.
So, we have to get with the program. Some things DO need to change. Some compromises DO have to be made by all stakeholders. Conversations and input DOES need to happen from the stakeholders who know best about how consumers wish to engage if the regulators are to create workable rules for all.
Workable rules that protect everyone in the business from ongoing reputational damage, fraudulent behaviour or cynical manipulation of consumers will serve the best interests of advisers too.
Let’s get with the program and help write those rules.