Trust Matters

So, 'Fred the Shred' is losing his knighthood.  Apparently, today they are talking about little else at Westminster.  The papers are full of split opinions about the whole matter - the CBI supports the move, whereas the IOD views the degonging as "anti-business hysteria".  No doubt, we'll see the usual spate of vapid, party-political, point-scoring initiatives, and then the matter will quietly fade away - having left a not insignificant lasting impact on the publish perceptions of trust.

Interestingly, as if to underscore the critical significance of this issue, Edelman have just published their 2011 'Trust Barometer'.  If the issue matters to you (and it probably should) then you can download a copy by clicking here.

Trust matters.  It is not easily won, and it may be so easily eroded.  Certainly, institutions such as the banks - and even government to a certain extent - manage the issue of trust by means of their public relations functionality.  It so often seems as if the basis for trust is established more by way of spin and marketing than by any real substance, which perhaps suggests why it may so easily be lost.  The Edelman Trust Barometer shows how 'trust' is becoming a rarer commodity in the UK, and indeed has declined significantly over the last 12 months - we would be unwise to underestimate how this may affect our engagement with both existing and potential customers.

IFAs stand in the most ideal position imaginable to create trust-based relationships, founded on something more tangible than a bit of marketing flim flam.  It is perhaps an indication of the sheer degree of opportunism, short-termism and cynical exploitation of customers that one encounters the embodiment of such values only occasionally, and in pockets - at ValidPath we certainly don't take it for granted when we find it amongst our own Members.  'Trust' is a very different thing to 'compliance', a fact that the bureaucratic nature of regulation appears slow to recognise.

Back in 2009, in our resource 'Beyond TCF', this was very much a core component of what we were advocating for ValidPath Members - and it continues to be absolutely key to everything we do.  In our opinion, thinking the right things leads to doing the right things, and those two factors provides a solid basis for becoming, to your clients, their 'Trusted Adviser'. 

If you want to read further on this foundational issue, we strongly recommend David Maister's book of the same title.  We'll be publishing an outline of its strategic content in our January/February edition of PracticeBuilder.

The myth of expensive Independence

PII - The Aftermath

We have finally put to bed our firm's PII renewal.  Every year, the process commences in mid-November and usually lasts until early January.  Each year, we have pre-emptively put in a great deal of work refining our systems to deliver the data the Underwriter requires, and each year their questions get more detailed and wider-ranging, so all that careful preparation proves inadequate.  Each year, there are Member firms that we have to keep chasing right until the final, final deadline.

It's all nail-biting stuff.  It may not be apparent from my photograph, but actually I'm only 27.  That's the effect of prolonged exposure to PII renewals.  I am thinking of updating my Linked-In profile with an image of an Egyptian Mummy, and leaving it at that.

We've always worked hard with the PII, primarily out of the conviction that this is a really important bit of insurance, and it's better for all concerned if we handle renewals as effectively and responsibly as possible.  To hear the complaints from one or two firms, you'd think that we were asking them to supply 100% of the information required by the Underwriter, instead of the (nearer) 1% that we have managed to knock it down to, thanks to our systems development.  Of course, we accept that there's no grounds for complacency here, and we have an ongoing project to maximise the effectiveness of our practice-management systems, so that our Members are to the greatest extent protected from the practical impact of this kind of reporting procedure.  The same goes for the RMAR.

Each year, when we approach our Members for supplementary data, it's difficult to know just how draconian one needs to be when it comes to issuing warnings about the effect of non-disclosure.  Sometimes, when one looks at the responses on a data-capture form, one wonders if the respondent has even considered the implications of what he or she is saying - it is as if, because the form asks for an answer, then something - anything - is entered into the blank space, in order to keep ValidPath happy, as if this were simply a way of keeping our technical staff busy, to give themselves something to do.

In fact, we only tend to ask questions in relation to the data that we do not have immediate access to elsewhere.  And, more importantly, we only ask for data which the PII Underwriter has requested - on the not unreasonable assumption that, if the information is required, then it must have something to do with (a) the risks being underwritten and (b) the premium we need to pay for our insurance.  When a Member Firm either casually, or wilfully, chooses not to disclose its exposure to something critical, then that is bound to have some kind of knock-on effect at some stage: actions have consequences.  And so, frequently, do inactions.

So, the PII renewal process does actually have some value, despite pushing me close to the brink of sanity.  It forces us to think about our business, about the things we do which contribute to elevated risks, or potential liabilities.  It requires us to move beyond a "it's just data" attitude when completing forms, to thinking about the value and importance of openness, transparency, and retaining good records.  And it makes us think again about the real value of the advice we provide, and the difference it makes to our clients.

P.S.  We deal with a really excellent PII specialist.  You can find out more by clicking here.

2012 And a less rubbish model?

It is no doubt a sign of middle-aged angst that I find more and more things to get angry about.  I am angry about the "Money Advice Service" which claims to be "free, clear and unbiased", at least suggesting that it offers an alternative to consumers to basic financial-planning services.  There's a slight unfair advantage here compared with our alternative ("fee-based, clear and unbiased"), particularly when one unearths the previous FSA invoice for periodic fees and all the other levies, and recalls that one is effectively funding this kind of competition.

And I'm angry about the compensation culture.  This (spoof!) advert (from the US) does very effectively reflect the mindless and largely unprincipled nature of much of what goes on.  Today, upon returning home, I listened with rising irritation as my wife recounted the latest telephone incursion into our home by an indian-sounding gentleman, speaking on a very bad line, who was calling us to discuss our "recent accident".  He could not tell us when it happened, how he came to know, who else was involved, what the accident constituted - nor indeed was he able to tell us the name of the firm he represented, or for that matter his own.  Sometimes I wonder about my own grip on reality, but this really took ignorance to a whole new level.  The Telephone Preference Service appears to provide little functional protection against this kind of thing, and indeed we had nothing to report back if we had felt sufficiently aggrieved to pursue the matter ('Number withheld'). 

On one level, of course, the matter is laughable.  On another level, it is rather more sinister.  We all complain about it, but it still goes on - there seems little motivation to put a stop to the thing, despite the self-evident undermining that is going on of basic human values.  Clearly, sufficient people are making substantial amounts of money out of greed and unprincipled self-interest, but I do not see a better world arriving as a result.

This week, we have seen a successful outcome when defending one of our Members against the depredations of one of the so-called 'claims management' companies.  The original complaint was so utterly baseless, and the validity of the original advice so absolutely clearcut that it was astonishing to find the matter referred to the FOS after our conclusive initial investigation.  In a rational and intelligent world we did not have many fears about the final outcome, but then again in a rational and intelligent world, the matter would not have arisen in the first place, and certainly would not have wasted the Ombudsman's time, or racked up significant time costs within our firm.

It is a sad but sobering fact that there are individuals and even organisations which are prepared to argue that white is black if they can see some pound signs attached to the end result, and such initiatives appear to have relatively few disincentives attached which might encourage a moment's sober reflection before embarking on a path of wanton opportunism.  This is the culture of Utter Rubbishness, so what can professional IFA firms do about it?

• Avoid complacency - you cannot see what goes on within the head of the client who, one minute, gives every evidence of being your Best Friend;
• Aim high all the time - and by this, I don't just mean maintaining your compliance standards at every stage in your advice process, but rather commit yourself to delivering such an excellent outcome that only the most pathologically opportunistic individual would choose a path of action calculated to deliver redress;
• Keep close to your clients - which provides less space for outside agencies to intrude in a suggestive manner ("Were you sold a blue-coloured pension??  You might be due compensation!");
• Observe the KISS formula (Keep It Simple, Stupid) - the probability of a successful complaint increases exponentially the more complicated or risky the solution you recommend.  Providing simple solutions where you have consciously minimised the number of factors beyond your control helps to reduce the number of options for the opportunist.  And it's good practice anyway.

Some festive stats

Having yesterday completed our final commission run of 2011, we thought it might be useful to compare this year with 2010 in relation to financial performance across our network.  Statistics rarely come unencumbered by twists that render them somewhat impenetrable to easy analysis, but the search for a little compensatory festive cheer in an environment of generally bleak financial results drove us on.

And, actually, what we discovered was generally encouraging.  85% of our Members showed a significantly increased turnover in 2011, compared to the 2010 calendar year.  Some of those increases in revenues were on such a ridiculous scale that it would make little sense to report them, as the firms concerned were either recent joiners, or had been (previously) devoting so little time to financial services work that any increase would have looked impressive.

In general, focusing on those Members who had been previously active in developing their financial services proposition, the improvement from 2010 to 2011 was in excess of 100%.  For those (Members) who are interested, we are able to supply their individual firms' figures upon request.  This degree of financial resilience which, by the way, is not typical of IFA firms across the UK, should place our Members in a good position to weather challenging trading conditions next year.

Now with that general encouragement comes the usual caveats.  During 2009 and 2010, our whole network was moving onto a single practice-management platform.  It's entirely possible that in the short term this transition may have actually held back performance, and it would certainly be true to say that there is a lag when it comes to logging accounting (fee & commission) data onto the system - which means that some of that improvement may simply be a product of chronology rather than business activity.

Season's Greetings to all our Members and colleagues.

In the dark when you buy?

When I was young and naive, I thought that the 'Ghost Train' and the 'Haunted House' were scary places to go into, when the travelling Fair came to town.  Now I have a brand new benchmark for intimidation.

Yesterday, in pursuit of that perfect Christmas present for my wife's niece, we ventured into 'Hollister', the clothing store where the young, hip and trendy hang out, apparently nurturing premature deafness and sight impairment.

For those who have, as yet, not experienced the blackout that is the Hollister Shopping Experience, it is worth observing that even with this helpful advance warning, nothing will prepare you for the sheer awfulness of your first visit.  It reminded me of a scene from the Alien II blockbuster, as one shuffles around in a kind of stygian darkness, relieved occasionally by a subdued light focused on a single item of clothing.  There were times when one could almost imagine the deadly alien foe uncoiling its lethal body behind a shadowy display of overpriced hoodies, ready to pounce - or at least charge one for the privilege of fumbling nervously with children's clothing in the dark.  Which, as I write about it, feels like a very strange thing for an adult male to be doing.

The powers-that-be at Hollister do not, however, consider turning their shops into an ill-lit catacomb, where it is almost impossible to verify the colour of a garment (at least not without staggering blindly out of the front door into the light, thus triggering the security alarm), to be a sufficient hindrance to informed shopping.  Oh no.  The unwary shopper is blasted with music at a volume which makes most rave events seem tame by comparison.  The combination of this assault on one's eardrums plus the optical challenge of identifying whatever it is that one is holding (is it sweatshirt?  Is it a soft furnishing?  Oh no, it's a shop assistant) creates within one a kind of panicked desperation to buy something, anything, in order to escape back into the real world.  One willingly parts with an astonishing amount of money for what is a remarkably ordinary sweatshirt, as this is the price one pays for freedom.

And freedom never tasted so good.  Blinded by the sunlight (all things are relative in Wales), one stands there gasping, trying to cough out the remnants of the ghastly Hollister perfume that appears to be squirted out of little sphincters in the wall, and clutching in one's shaking hands a garment that is at the same time profoundly disappointing and yet in a strange way, quite precious.  And, in an uncharacteristically perverse moment, I found myself wanting such retailers to be regulated.

For, what Hollister does to its customers seems the exact reverse of everything that we have in recent years been endeavouring to build for our clients.  Customers (or 'consumers' a la FSA-speak) are literally forced to buy in the dark.  I am not sure that the products are particularly good value - but in any case, the circumstances of one's purchase makes it impossible to determine very much at all about the item.  I would imagine that most people are shocked when they get their acquisitions home and discover what the real colour is - which in financial services' terms takes us back to the bad old days of the 1980s.  Expensive products which we discover are not quite what we thought they were, and which we purchase through a sales process which forces us to make poorly informed decisions, as we are intentionally deprived of key items of information, or subtly pressured into the 'buying decision'.

Thank goodness, that's not where we are now.  ValidPath Members have access to some of the best-value financial products in the UK, where every key facet of those products is available for scrutiny in the clear light of day, and where the tools are available to ensure that they 'fit', that they are absolutely right for the client concerned.