Kit Bags, Big Sticks and being in “the shadow of regulation”

In the middle of 2012 a financial ‘advice’ business sold for 87 million pounds.

Whilst this sale was widely reported in both the mainstream and financial press (the guy who set the business up is a bit of a PR expert) it pretty much passed the traditional financial planning and advisory world by, with only a ripple of reaction in the financial world.

This may be because of the fact that we’re bombarded by noise, in the form of ‘news’ (where most of it isn’t really), everyday.

It may be the fact that in certain parts of the profession (or industry) we call advice (or even planning) there is a certain amount of snobbery.

or

It may be that many of us didn’t consider this business to be about ‘advice’ at all.

By now you might probably guessed but I’m actually talking about…

Money Saving Expert, Martin Lewis’s site.

“Hold on Chris” you might be saying “Money Saving Expert isn’t about financial advice. It’s about saving money on day to day expenditure, or reducing household bills, or reclaiming PPI.”

“Hold on yourself!” I might say, trying to sound both polite and robust at the same time “Most of us live in a professional world where our clients have already ‘made it’ from a financial perspective, or at the very least are well on their way there. Whilst they might appreciate our guidance and support, actually, they are the individuals who need a professional financial planner the least!”

“Most people” I might continue “Don’t ever worry about lifetime allowances, or fully topping up tax free wrappers, or regularly maximising pension contributions.”

“Most people” I might proclaim “Worry about exactly about the topics that Martin talks about on his website. Balancing monthly budgets, saving money on regular expenditure and using vouchers to enjoy a night out with the family every now and again. If this isn’t ‘advice’ I’m not sure what is!”

I know there is usually some debate on what ‘advice’ is and whilst it’s an interesting subject I’ll save this for another article. For the purposes of this article I’m using ‘advice’ as it’s defined in the (Oxford English) dictionary…

Guidance or recommendations offered with regard to prudent action.

Also, I know that many reading this might roll their eyes when hearing Martin Lewis’s name. You’ve probably got your own reasons for this. However before writing Martin or his website off consider this.

He has done more to stimulate public conversations about money in the UK than anyone else in the past 20 years.

Whilst you might disagree with his opinions or his approach you can’t deny that.

Even many of our clients, with their (relatively compared to most people) large pots of assets, are not concerned about the technical, their concerns are based on human emotions.

For all of us regardless of how much we’ve got in the bank Fear, Desire, Hopes and Dreams are far more compelling than Allowances, Regulation and ‘product’.

So, one of the most effective financial ‘advice’ models in the past 10 years was highly profitable, seemingly built on a desire to help, web based and..

.Non Regulated…

Which after going round the houses a bit brings me to my question…is regulation doing ‘the job’?

I understand the need for regulation.

I like the fact that it’s designed to stop bad people doing bad things and provide nudges for people who might be tempted to.

I like working in a regulated environment and also think the ladies and gents at the FCA are well meaning and want to do a good job.

I also like the fact that more recently the FCA are exploring subjects you don’t traditionally expect them to (on that note occassional paper 1 is worth a read).

However I’m not convinced that current regulation takes into account our changing world, maybe this is due to the regulators historic focus on products, maybe it isn’t.

As Phil correctly concluded in his article the future of financial journalism is changing but it’s not the only part of our professional environment which is in a constant state of flux.

Martin Lewis’s site has proved that a non regulated ‘advice’ affiliate model can work if you can generate enough brand awareness and visitors to your site, through giving useful information and providing useful tools.

I’m wondering how long it will take for a new technology based mass market model to come into play which instead of helping people with their immediate financial needs, focuses on helping with their longer term financial goals?

 Not one based on ‘product distribution’ but one based on true planning. One based on coaching people to a better financial life (one example I considered is here) as opposed to selling them a product that they might need, or might not!

and

Maybe regulation is holding us back from moving forward.

The nature and size of market regulation is that new ideas, and especially from the individuals who fall within the remit of the regulation, are potentially stifled due to the fact that the new concept might not fit within the remit traditional rule book.

However if the rule book is built on a legacy of ‘product’ are new ‘non product’ business models being subdued due to the ‘shadow of regulation’.

As always I’m not sure of the answers but I like the idea of raising the questions.

So, what do you think?

Is regulation as effective as it should be? and is it evolving in pace with changes both in the market and Technology?

If unregulated ‘advice’ models can be run ethically and profitably whilst talking about non regulated products is regulation stifling the emergence of more interesting and diverse business models in the financial planning space?

and

Whilst a ‘big stick’ approach might be a necessary tool in a regulators kit bag, does the fear of this ‘big stick’ stop ethical and effective new business models to emerge? Or is the prevalence of the regulators ‘big stick’ actually a fallacy used to promote ‘product’ by certain interested parties?

As ever I’m interesting in hearing your thoughts…