Independence is an intricate concept. We all love the idea of being truly independent as it insinuates that we call the shots, however, achieving this is tricky and somewhat scary. There is also some very deep seeded primal wisdom in a sermon by the seventeenth-century English author John Donne, that “no man is an island”. No one is self-sufficient; everyone relies on others.
The problem thus lies in marrying your desire to generally get what you want, with staying connected to the world and benefitting from the sounding boards and feedback loops that comes with it.
One would after all have to be rather naïve to believe the best outcome would result from relying on your own skills for all facets of running a successful enterprise. Simply hiring subordinates is not good enough either, as you also need peers to test ideas and add value. You cannot keep scooping from your internal bucket of intellectual capital without replenishing it, as advancement is limited without external resources present to stimulate evolution.
The trick is thus to align yourself with like-minded individuals, whom have similar goals and values. You need a support structure of people whom create the most conducive environment for your expertise to shine, whilst not interfering, thus providing you the freedom to focus on what you are good at.
This is currently very relevant for Financial Advisors considering independence but fear regulatory compliance, especially given the impending onset of the Retail Distribution Review (RDR). Various institutions have cookie cutter solutions to accommodate this, but how do you ensure that you truly retain your independence and most important your clients, should you eventually decide to move on? This truly is a conundrum.
Another consequence of regulatory changes (as far as current proposed drafts are concerned at least) seems to be that the additional costs of regulatory compliance imposed on the industry is mostly passed on to the client-facing advisors whom already earn smaller margins on savings products. Earning less, even though they are the ones facing client questions and defending investment positions, which is not an easy task given how emotional people are when it comes to their money.
We believe that each role player should focus on what they are good at. In a nutshell, what RDR is trying to achieve is to ensure that anyone in the value chain is compensated for the aspects where they actually do add value.
An advisor’s value in our opinion, is the trust relationship with the client as a result of sound financial advice. The best investment regulatory solution for an IFA would be for a third-party discretionary FSP to offer the IFA investment compliance and asset management, and in turn get compensated for that whilst not meddling with their client in any way. This arrangement then frees up the time of the advisor to get out there and do what they do best, with the peace of mind that the rest is taken care of including transparency of fees and knowing investment decisions are not made for the wrong reasons.
Only a true independent boutique discretionary fund manager can offer an IFA such solution, not a corporate.
Speak to us, we are after all Stronger Together.
Simon Morrison, CFA – Fund Manager Multivest & RSA Multi Asset Managers