FCA thematic review 'wealth manager' portfolio suitability.
Discussion
If you've had poor advice from glib, costly advisers recently, this latest report might make interesting reading.
https://www.fca.org.uk/news/tr15-12-wealth-managem...
https://www.fca.org.uk/news/tr15-12-wealth-managem...
- I should point out that costly doesn't always mean 'poor' advice. But generally, greed and unprofessionalism (and incompetence) go hand in hand.
Edited by Ginge R on Tuesday 22 December 10:17
Eric Mc said:
I'm not sure I understand the thread title.
Sorry Eric. Basically, still too many cowboys. I find myself agreeing more and more with the regulator in many areas. In itself, that depresses me too! Lots of 'wealth managers', private banks and discretionary fund managers (as well as advisers) are using in-house processes to invest clients money, much of it badly. The funds used are too expensive, inappropriate and the systems used to establish suitability is bad. I have seen lots of DFM funds that are labelled as boggo standard middle of the road in terms of risk, which have c.85-90% equities.
JPM at it too, in the US.
http://citywire.co.uk/new-model-adviser/news/jpm-w...
Whilst I understand the broad approach I find it astounding that almost any equity fund/portfolio is these days classified as High Risk. To my mind what's high risk these days is to hold "risk-free cash" and watch inflation erode value every day.
As regards the industry, its fundamental problem remains that in any selling business the salesman will tend to sell whatever is in HIS best interests. Sure, the system may be moving away from "commission" to "fees" but the salesman still wants as big a slice of pie as possible in exchange for as little effort as possible. Put crudely, if "shiny tat" is easier to sell than "quality goods" then that's what the salesman will be pushing at his customers.
And the expression "Wealth Management" is ridiculous - see also "quantitative easing", "enhanced interrogation", "dashboard of metrics" etc.
As regards the industry, its fundamental problem remains that in any selling business the salesman will tend to sell whatever is in HIS best interests. Sure, the system may be moving away from "commission" to "fees" but the salesman still wants as big a slice of pie as possible in exchange for as little effort as possible. Put crudely, if "shiny tat" is easier to sell than "quality goods" then that's what the salesman will be pushing at his customers.
And the expression "Wealth Management" is ridiculous - see also "quantitative easing", "enhanced interrogation", "dashboard of metrics" etc.
I'd agree with some parts of your analysis.
Financial Services is sales, and we are remunerated based on clients making a decision. In itself, nothing wrong in that (we are all paid based on our skills and experience) but I would never sell (shiny) tat or disadvantage any client. You probably won't agree with me, and that's fine. There are some dreadful Cowboys out there though, accepted.
Financial Services is sales, and we are remunerated based on clients making a decision. In itself, nothing wrong in that (we are all paid based on our skills and experience) but I would never sell (shiny) tat or disadvantage any client. You probably won't agree with me, and that's fine. There are some dreadful Cowboys out there though, accepted.
Ginge R said:
Financial Services is sales, and we are remunerated based on clients making a decision. In itself, nothing wrong in that (we are all paid based on our skills and experience) but I would never sell (shiny) tat or disadvantage any client. You probably won't agree with me, and that's fine. There are some dreadful Cowboys out there though, accepted.
Yes, I think that's fair. After all, we know that in the motor trade there definitely ARE reputable traders as well as the other variety. As always, it's best to shop on the basis of a sound recommendation from satisfied customers rather than picking a name from Yellow Pages.Incentivisation is always a difficult subject - I'm not a fan of the industry taking a fee regardless of performance as it encourages a laissez faire attitude to Client money, but at the same time rewarding returns based on short term gains encourages risky behaviour - and long term gains doesn't hold people's attentions.
Ozzie Osmond said:
Yes, I think that's fair. After all, we know that in the motor trade there definitely ARE reputable traders as well as the other variety. As always, it's best to shop on the basis of a sound recommendation from satisfied customers rather than picking a name from Yellow Pages.
Funnily enough, I tweeted yesterday that although I took down my main website (www.echelonwealthcare.co.uk) a few weeks ago, I'm getting more leads than normal. All from people kind enough to lie shamelessly about me to their mates. I might experiment and not bother with it at all in 2016!Mattt said:
Incentivisation is always a difficult subject - I'm not a fan of the industry taking a fee regardless of performance as it encourages a laissez faire attitude to Client money, but at the same time rewarding returns based on short term gains encourages risky behaviour - and long term gains doesn't hold people's attentions.
Agree.Most good clients know that it's not always about returns *all* the time. You have to make sure that a plan is cogent in the wider sense; tactics, strategies and outcomes must all interlock too. *Too much* focus on funds, price, cost and quick returns, at the expense of identifying! obtaining and maintains objectives, induces one to take one eye off the bigger picture.
In that context, if a client presents complicated circumstances, a fee based system works best. In the sense of an affluent saver with relatively simple needs, or a younger saver simply wanting to accumulate wealth in order to then create options and then gain traction, then (imho) percentage based remuneration can work best.
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