For many advisers, the jury is still out on the value of the Future of Financial Advice (FOFA) legislative changes. Regardless of whether you are pro- or anti-FOFA though, there is almost universal acceptance that FOFA is yet another step along the road to the sector becoming a profession.
But no other profession that I’m aware of is so prescriptive in what its main actors can do and say, and how they must do and say it.
Could you imagine the uproar if the regulators tried to tell lawyers, accountants, engineers and architects exactly how their advice must be presented to clients to demonstrate it is in their best interests and the myriad disclosures that must go with it? Of course, what led us to this situation is a story for another day.
But be that as it may, our regulatory regime, including FOFA, is here to stay for at least the medium term. So, rather than rail against the regime and lament the micromanagement that is part of it, it’s much more productive to turn our minds to how can we make the most of it. Luckily, if you have a growth mindset and aspirations, FOFA can help.
FOFA has become a lightning rod for financial services businesses to review what they do and how they do it. When combined with the already highly prescribed, heavily regulated financial services regime, FOFA almost demands that advisers re-imagine their businesses as bigger than any individual, to develop a professional practice, not just a personal consultancy.
With shrinking margins and additional compliance obligations it is becoming harder and harder for sole operators to make a decent living.
Luckily, the new requirements will reward those brave enough to commit to building a practice with scale. The financial services regime demands all advisers bring process and procedure to every part of their business. Everything from recruitment, to fact finding, to record keeping and advice delivery requires provable, repeatable processes. And the best way to deploy such procedures is via a team.
What is a burden for a sole operator suddenly becomes more effective and efficient when applied with a bit of scale. Those same compliance burdens that shackle one-man (or woman) bands help provide measurable, manageable outcomes when used to build a sizeable, multi-adviser practice. Services are delivered consistently. Administration is performed seamlessly. Growth becomes manageable. And whether it is an unintended consequence or not, FOFA and the burdensome financial services compliance obligations help to deliver it. Yes, FOFA really can be an adviser’s friend.
Ian’s top three tips on what we can learn from FOFA:
- Regulation a necessary step in transitioning to a profession
- Businesses of scale will be rewarded and encouraged under the new regime
- Compliance need not shackle advisers
Ian McDermott is Principal Lawyer with imac legal & compliance, a law firm and compliance consultancy specialising in small and medium-sized financial services businesses.
