Changes in financial services regulation

Attivo’s mission is to answer questions about Lifestyle Financial Planning with direct explanations. Here, Ian Plumpton talks about regulation changes in the financial services industry.

Ian Plumpton is Chief Operating Officer at Attivo and has worked in financial services for over 30 years. Ian, an MBA-qualified senior leader, ensures that Attivo’s financial planning subsidiaries comply with regulatory obligations. He says: ‘There’s nothing for clients to fear when it comes to the new regulatory changes. If there is anything to worry about, it’s to make sure that the financial planning firm you choose has a long-term future.’

Q: Should I be worried about all of the recent changes in the financial services industry?

A: The short answer is no, there is absolutely nothing to worry about – the changes are positive for clients of financial planning firms. Just over a decade ago, the then regulator, the Financial Services Authority, introduced rules known as the Retail Distribution Review to improve the advice sector and, in essence, bring about greater professionalism and, for clients, more transparency. This was quite revolutionary for the advice industry in many ways and actually forced the early retirement of many financial advisers, given the magnitude of the changes and the increased expectations it put on them.

Fast forward a decade, and while the sector has improved significantly over the last 10 years due to the FSA rule changes, most of the rules focused on businesses in the sector, with the idea that better businesses will deliver better outcomes for their clients. Unfortunately, this isn’t always the case and bad actors still harm the sector’s reputation. You may have heard about Consumer Duty (see explanation below) which the regulator (now the Financial Conduct Authority) hopes will bring about better client outcomes on an industry-wide basis. Consumer Duty came into force on 31 July 2023 and places a legal duty on financial planning firms, like Attivo, to demonstrate that we are delivering value to our clients and being proactive in making sure any foreseeable harm to our clients is avoided.

Like the Retail Distribution Review that preceded it, Consumer Duty will revolutionise the advice sector and force many financial advice firms and their advisers to consider their future. If you look at data provided by the regulator, the advice sector is largely populated by financial advisers nearing or at retirement age. Over half of the advisers in the UK are aged over 50. When faced with ever-increasing expectations from the regulator, it is understandable why many want to move onto a new chapter of their life.

However, throwing in the towel isn’t quite so simple in a regulated sector, and companies will need to ensure continuity for their long-standing clients. So, if there is anything you should focus on, it’s to ensure that the financial planning firm you choose has a long-term future, such as Attivo.

Remember, the changes are positive for you, with the regulator driving up standards for your benefit. However, these increased demands create cost burdens and the need for new capabilities, which inevitably means fewer firms will survive.

According to the regulator’s data, there are just over 5,000 financial advice firms in the UK, and only one per cent of those have more than 50 financial planners – Attivo  sits in this cohort.

At the other end of the spectrum, and perhaps worryingly, 4,474 (88 per cent) of financial advice firms have an average of only two advisers. In addition to the fact that over half the advisers are nearing retirement age, it’s easy to see why the sustainability of most of these firms is in question.

As with any industry, scale is crucial to building a well-resourced business to meet the increasing expectations of all stakeholders, be it the regulator or clients. I know what Consumer Duty alone has demanded of Attivo, and I struggle to see how many of our smaller peers in the advice sector will cope. And Consumer Duty isn’t the only change being imposed on our sector.

‘Attivo is currently one of the few firms with more than 50 financial planners’

In all my years working in financial services, one thing that has always been clear to me about our regulator is that they think bigger is better. The fewer firms they have to regulate, the more active they can be with them, which is better for clients.

I can foresee a world where we have 100, not 5,000, advice firms in the UK,  with the remaining 100 firms having three or four hundred Financial Planners. The key for you, the client, is partnering with one of the 100 firms, not the 4,900.

Q: Why is Attivo better placed to support this kind of shift than other financial planning services firms?

Scale is critical as the above shift takes place in our sector. Attivo is currently one of the few firms with more than 50 financial planners. Consequently, it has the support, infrastructure and competence you would expect of a professional medium-sized enterprise.

Attivo is also trying to do things differently and disrupt the sector with the aim of delivering a better proposition than the market has traditionally offered to our clients. The dogmatic focus of our leadership team, combined with an understanding of the sensitivity of cost and our scale, allows us to get better deals for our clients.

Our financial planning team

Our Attivo Academy has played an instrumental role in helping build and develop our financial planning team – we’ve had some fantastic success stories. The average age of our planners is 40, well below the industry average of 57. Our planning team is among the most qualified in the sector, with many at Fellow or Chartered level. Attivo is a Corporate Chartered Financial Planning firm symbolising technical competence that signifies a commitment to professional standards.

I recently attended a session with Morningstar, the US-based financial services conglomerate, where they studied the factors influencing trust in the adviser-client relationship. They concluded that the number one factor in building trust was expertise.

Attivo is a growing business, but we will not compromise on the technical competence of the planning team, which we see as critical to building trust with clients. No matter which Financial Planner you deal with at Attivo, they are all highly competent, supported by equally exceptional colleagues and best-practice technology.

Q: What is it that Attivo offers that other companies do not? What do you provide to clients that other financial planning firms can’t or won’t offer?

Our sector has a long history of finding a client to sell a product to, which is the opposite of how the relationship should work. Thankfully, the regulator has helped bring about positive changes over the last decade to put the client first. Whilst the ‘client first’ approach has been a positive step, financial planning is still too financial product-led, and this is where Attivo is different.

Attivo: not just about pensions and savings

Attivo is proud to deliver genuine Lifestyle Financial Planning, which isn’t just about your investments, pension or savings. Lifestyle Financial Planning is on a much higher plane and starts, quite simply, with ‘What matters most?’. Obviously, the financial products will follow at the right time and for the right reasons, which are personal to you.

We are probably guilty of assuming our approach is the norm and hiding our light under a bushel. Recognising this, we are going to be repositioning our Lifestyle Financial Planning proposition over the coming months to boost our credentials as consumer champions, working hard on your behalf to deliver real value and savings.

Touching back on the Morningstar research on factors that influence trust in the adviser-client relationship, the second most important was personalisation. This focuses on delivering advice that is suitable for the client’s circumstances, and the Financial Planner listens and acts accordingly so that the planner understands the client’s goals.

Thankfully, our approach to Lifestyle Financial Planning addresses all of these areas. I hope ahead of your next meeting with your Attivo Planner, you are prepared to answer the question, ‘What matters most to me?’. You will get so much more from your meeting and Attivo if you start by answering this very simple question.

Jargon Buster

CONSUMER DUTY

Consumer Duty is a new set of rules, regulations and guidance laid down by financial services regulatory body, the Financial Conduct Authority, which aims to set higher and clearer standards of consumer protection across financial services and requires firms to put their customers’ needs first.  It came into effect on 31 July 2023 and will only benefit clients of financial planning firms.

*Article correct at October 2023.

Prepare for your next phase of life

If you’d like to bring your vision for the future to life, why not talk to Attivo about our unique Lifestyle Financial Planning and how we can help you with the next stage. Click here to contact us.