For financial professionals only
In episode 2 of our Let’s Talk Retirement series, Retirement Specialist Patrick Ingram will be talking to Philippa Hann, Managing Director of Litigation at Clarke Willmott about the importance of good governance in adviser business. To reserve a spot at the webinar, please click here.
There are three good reasons why governance – or more simply, quality control – needs to sit at the heart of every advisory firm’s Retirement Proposition.
It’s good for business
Putting governance in the shop window shows customers you have their interests at heart. Before the world was overrun by the internet, digital media and pretending everything was free, on demand, there used to be something called ‘advertising’. This was all about telling people what was great about your business and what they could expect from your products and services.
People approaching financial advisory firms have a set of familiar questions they need to answer about candidate advisers. How much will advice cost? Is the adviser expert and reliable? How do they know they are getting good, useful and productive advice?
Putting it out there that your firm operates in the retirement planning space with great care and internal oversight answers these questions. It demonstrates a commitment to transparency which is so essential to trust.
Here’s the sort of message you want to get across to prospective clients:
“Retirement planning can be complex. We make it simpler to understand all the choices and opportunities you face. Our guiding principle is that clients taking our advice should experience a good outcome, consistent with the expectations we establish and agree in our discussions together. Our internal governance monitors every client’s investment outcomes to ensure they are achieved cost effectively and with the level of risk you feel comfortable in taking.”
We are all fallible
Retirement planning is about predicting the future. And that’s hard. It means having a good understanding of the likely outcomes of a range of products, figuring out how they might be blended together most effectively, and mapping it all to the circumstances, needs, motivations and objectives of a household.
It’s rarely just one individual who is considered in a personal recommendation – it’s generally a couple, with dependents. Advising on retirement is much more difficult than just(!) predicting the future. It can get close to counselling.
What governance can bring to a firm’s Retirement Proposition is a more formal setting to tackle that classic question from a colleague: “What do you think of this case?”
Sharing a standardised set of data on clients’ retirement plans and discussing the implications as markets and products evolve will identify the tensions between individual advice and collective wisdom and bring these out into the open. With business value entirely contingent on the quality of robust advice, it’s good to see where improvements might be possible and where respective approaches are succeeding. Or not.
Because it’s the rules
Without wanting to labour the point, the PROD regulations – which came into force in January 2018 – expect advisory firms to implement governance across their entire proposition in a quite explicit way. You need a clear statement of your target customers, a view of their needs as clients, a statement of how these will typically be fulfilled and Management Information to see how this is panning out, in reality.
Your Compliance Function needs to report in on how things are going to the Directors who, of course, have their newly sharpened responsibilities under the Senior Managers regime. Doesn’t it make sense for everyone involved in advice to see the same summary details that go to the board for consideration?
This allows each adviser and every colleague to say, “We constantly review all our clients’ outcomes internally, as part of our commitment to professionalism and transparency, and you are right on track.”
Join us for Let’s Talk Retirement and Governance with Patrick Ingram and Philippa Hann on Friday 19th June at 11am. The webinar is accredited with 1 hour CPD and you’ll have the chance to share your views and ask any questions on retirement and governance.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.