In Australia we are starting to see considerable debate in the public domain about the possible shortcomings of the recent regulatory frameworks, and also differing ideas of what ‘should’ be done to improve the situation, with many firms, organisations and associations putting in their ‘ten cents’ worth.
Whilst some of the comments and suggestions appear to defensive about past practices, and some of it being about a desire to take the high moral ground, with an inference that other views may be lesser, my observation is that most of it has merit, and we are inching towards the development of a new set of standards and regulation.
Whilst some of this new era standards and regulation may be in the form of training and qualifications, some in the form of removing conflicted remuneration, my guess is that the whole industry is finding it’s way towards what is becoming acceptable to both consumers (otherwise consumers will go elsewhere) and / or the mass public opinion (otherwise it gets attacked in the media). I call this the ‘social regulator’.
As we are seeing in the UK now, the ‘social regulator’ is getting increased coverage and attention, fuelled by media campaigns by the Telegraph and other papers. Not suggesting that this is the only influence, but it does appear to have to have some influence on policy, and feedback associated with setting such. It looks like there is nowhere to hide for regulators and politicians now and there is equal political and reputational risk of doing nothing as well as making changes.
In Australia recent responses and suggestions include the suggestion of a consumer standard way of measuring or assessing financial advisers, which has merit. I do however think that this theme needs to be extended not just for advisers or money managers, etc, as I think it is the segregation of these roles that confuses much of society. We need consumer opinion of the overall experience and proposition by industry participants, and if the social regulator theme continues, I suspect it will be happening quite soon.
At Financial Simplicity we have been working on this theme for some time to help firms assess their overall proposition to consumers, provide a basis for comparing against others, and identify remedial and pro-active ways to improve such. Ultimately I think that either the ‘social regulator’ and / or consumers themselves are going to force this change, and my tip to industry participants is to be very clear on what is your value add, or be at the risk that your customers and social commentators start publically scrutinise what you are doing. A far better result that we help firms with is to help firms articulate this proposition and constantly communicate with their clients to be one step ahead of the public debate.