by Kim North, Co-founder, Technology & Technical 

Kim North, Co-founder, Technology & Technical

Now we have the final consultation on the menu, bringing us tantalisingly closer to the final raft of the depolarisation rules, a cloud of relief floats around IFA offices. But why? From an adviser’s point of view, apart from deciding whether to become a single tie, multi tie or remain independent, very few changes are needed to internal processes.

The only other major decision to be taken is whether an advisory firm wishes to take responsibility for their own compliance or pass the responsibility elsewhere - for example to a principal under the mortgage adviser regulations, which will apply from 31st October this year. Whichever route is taken, as long as appropriate technology tools are in place to keep the regulators calm and clients impressed, it appears that firms can continue to build an advisory business of substance as the net wealth of the population increases.

Compliance Costs

The majority of the cost to implement some of the new rules appears to be in the reproduction of the required compliance documentation. Having personally written more than 750 Key Features documents over the years, for many providers, I am keen to ensure that clients are given documentation they want to read so there are no surprises. The move from Key Features to Key Facts may help with clarity if a client does bother to read the document, but at what cost? The point of sale documentation produced by providers will have to go back to the drawing board again for a wholesale rewrite, re-print and re-distribution, albeit some of this electronically, saving some of their precious budgets.

The proposed initial ‘Key Facts about our services’, or Initial Disclosure Document – which is the first document a client sees, seems to work well thanks to the invaluable input of AIFA and IFA Promotion. This document mentions the regulator, the ombudsman and the compensation scheme by name, but also substantially more than the name of the company providing ‘the service’. However the client may be comforted that the FSA is far more prominent in the point of sale literature than ever before, which could encourage clients to seek guidance from the regulator should they need further information or have a problem. Although in contrast, there could be the perception that the FSA has endorsed the product, which may not be quite as sensible.

Each firm will also need a corporate brochure or ‘guide to our services’, a professional web site, structured e-mail contact and a quality help line if the client is to always contact their firm first for any financial matter. According to IFA Promotion, who has over 10,700 IFA firms as members, there is some way to go for IFAs to reproduce this ecommerce utopia, as only half of their membership claim to have a website.

Until UK financial services moves closer to the US model, where financial products are vetted by the regulator before being marketed, we will operate in an arena with far too many products (over 30,000) and many unsuitable products manufactured by providers - such as those highlighted by the precipice bond debacle. Even though a raft of further regulatory change follows, from the ‘Insurance Mediation Directive’ to ‘Sandler’ to ‘pension simplification’, amongst this noise and activity very little is being discussed regarding the responsibility of providers to ensure products are ‘fit for purpose’.

The depolarisation draft rules have indeed laid a ‘golden egg’ at the feet of IFAs to really lift themselves above the confusing and overcrowded array of distributors and rightfully claim their territory as the only place to get truly independent financial advice. The costs may be painful short-term but the eventual winners longer-term could well be those who do their preparation ahead of the rest and the role of technology in reaching this position should not be under-estimated.

About Kim

Professional Adviser recently placed Kim North in their top 50 most influential people working in the Independent Financial Advice sector. Kim’s background includes 8 years with Royal Insurance and a further 8 years at the Pretty Technical Partnership (PTP), which she co-founded with Jo Smith. PTP provided consultancy to over 50 financial services companies over this period. Kim’s activities continue to be varied – recently delivering the e-commerce strategy and implementation for a National employee benefits company and in the past regularly represented AXA on the ABI initiative SALTR – Raising Standards, on the Communications Group. Kim has recently founded ‘Technology and Technical’ in partnership with Nicola Mitchell – which aims to help the financial services industry develop and promote relevant technology which supports the ever changing regulatory environment.