Neutral Debate Addendum

I attended a lively POD meeting last night, where this issue was raised as an agenda item by another IFA member. He was putting the argument for change, to allow Financial Neutrals to act as Implementer, should the client wish it.

It was a considered and well reasoned argument too, borne out of a genuine concern to do the best job possible for the clients and to address certain regulatory anomalies. I maintained my view (probably rather less eloquently) and we were called to a halt by some rather bemused looking Lawyers, as our discussions descended to more technical and regulatory depths.

I understand that this issue will be an agenda item for the up-coming POD Liaison Officers meeting, which is good. I also believe that it has been, or will be raised at the Resolution ADR committee meeting.

Some very real points of interest were raised last night and it is worth airing them I think:

If the role of the Financial Neutral is unregulated, as the FSA suggests, then the decisions reached and the agenda presented to the Financial Implementer has not been borne of a Regulated Advisory process.

If, as has been suggested, the client presents this agenda to the Financial Implementer as an ‘Insistent Customer’ or for ‘Focused Advice’, then the Implementing IFA will act accordingly, not commenting on the generic product decisions, but rather advising on the specific product and fund choice, or specific Insurance Company for protection, etc...

The perceived dilemma here is that the client has no regulatory recourse to complain about the generic product decisions that have been made as a part of the Collaborative process.

If the client insists on a full advisory service from the Implementing IFA, then that IFA will be required to analyse the objectives of the financial settlement and the generic decisions taken and might, conceivably, question them.

The second point is far simpler and less technical.

If the client or clients wish to employ the Financial Neutral as the Implementing IFA, is it right to restrict their choice to do so? If they feel that a rapport and trust has been built, how is the decision to exclude this possibility compatible with the FSA ‘Treating Customers Fairly’ regime?

As to my view, I still think that it is imperative that the Neutral role remains true to its name.

The whole point of this process is that it requires the clients to take ownership of the decisions that they make. Sometimes, the financial settlement might appear to be very unbalanced or illogical, because it is a result of a trade-off over something else (custody of the dog, the family nose flute collection). It is easy to see how somebody from outside the process might not appreciate all of this.

If the clients wish to complain about the advice that they have received from the Financial Neutral, then they have recourse to the Courts, but that will hardly fill them with confidence.

Personally, I would feel far more comfortable if the role of Financial Neutral was a Regulated activity, requiring Accreditation and special FSA permissions. However, I fear that the chances of the FSA hopping off its ‘Light Touch’ regulatory fence are pretty remote.


The beat goes on..............

When is a Neutral not?

At the risk of being lynched by fellow members of the IFA community and sending the rest of you to sleep, this is an issue that needs airing.

As those of you who are familiar with the Collaborative process will know, the role of a Financial Neutral has been developed in line with the international ethical standards produced by IACP:

http://shrunk.net/5508e664

These guidelines make it clear that the Neutral must hand the process over to an Implementer at the appropriate stage and cannot maintain a relationship with the client, beyond the Collaborative process.

An argument has been put forward, that to restrict the relationship in this way takes choice away from the client and is not on a par with other professionals that might be involved in the process.

• For example, are there restrictions on an Accountant who is brought in to the process having a continuing relationship, or the Collaborative Lawyer cross-referring to others in their firm for Wills, Conveyancing etc.?
• If the client has built up a level of trust with this highly qualified, Resolution Accredited Financial Planner, then why shouldn’t they have the option of engaging them for Implementation?
• Otherwise, who is going to police the quality of the Implementer?
• It has even been suggested that there will be additional cost, through duplication of work (it is an FSA requirement to undergo a ‘know your client’ process).

My view, for what it is worth, is that to stray from the current path would be very dangerous indeed.

The role of the Neutral needs to be just that. Neutral. The advice that they give must be fee based, generic and not product related. For there to be any hint of conflict of interest, or ulterior motive, could be disastrous.

Our ‘profession’ is not renowned for its’ self-policing abilities.

In any event, I don’t see that there should be any problem for the client if the process is managed properly.

Any Neutral worth their salt will recommend that a fellow Resolution Accredited IFA be used for Implementation. Otherwise, if the clients have existing IFAs, then they can be briefed by the Neutral as a part of the process.

The flow of information between Neutral and Implementer should avoid duplication of work, without any FSA/Compliance issues (bear in mind that the role of the Neutral is not a regulated activity) and the client should be well informed enough by the end of the process to make an ‘insistent customer’ request to the Implementer, avoiding any unnecessary duplication of work and minimising cost.

Here’s the rub:

The lifeblood of most IFA firms is the recurring income that it receives from funds under management, which make the role of the Implementer potentially far more lucrative than that of the Neutral.

For what it’s worth, I do not believe that the IFAs who put forward these views are thinking of anything other than the good of the client. However, it would be a crying shame if accusations of commercial interest were to reinforce a stereotype image of the Financial Adviser at a time when we need to assert our professional standing as an integral part of this process.

If others in the equation have potential conflict of interest issues to deal with, then let them deal with it. Just for once, maybe the IFA should set the bar.

Form P1 Conundrum

I have come across an interesting point of procedure, which I believe may differ from one Court to another.

The Form P1 has a space at the top of the first page for the date to be entered. However, as the Form P1 is an Annexe to an Order, which is already dated, it is common procedure for the Court not to put a specific date into this box; typically just inserting the year.

I believe that there is no obligation to put the full date on to the form (if anyone out there can point me to the relevant section of the Family or Civil Proceedings rules, I’d be most grateful).

However, this can cause problems. I have a case at present, where the ceding scheme is refusing to commence implementation until the Court inserts the full date.

Happily, the slip rule and a helpful Family Team at this particular County Court should prove a relatively swift solution to this particular case.

However, I am aware that the pension administrators dealing with these orders are increasingly wary over this issue. There is some logic to this as, without the specific date on the Annexe, there is nothing to tie this document to the Order and mistakes or falsification could occur.

At the very least, entering the specific date of the Order on the P1 can do no harm and will save any confusion or doubt.

It might be worth ensuring that the covering letter to accompany the submission of the Form P1 requests that a specific date be entered by the Court?

First Post

So, I thought it would be a great idea to have a blog.

After all, everyone else is doing it.

Now I’ve got to think of something to say!

I hope that those practitioners that I’m already working with will use this as a forum to discuss issues of interest. I hope that practitioners that I don’t currently work with will somehow stumble across this and join in too. I also hope that other Financial Planners will enter the fray.

To give a bit of personal background, I am predominantly a pension specialist and really fell in to working on divorce cases by default. Without question, this has given me the most satisfaction, in terms of feeling that I make a difference for the Client. So now I specialise in this work.

I’m a bit evangelical about the role of Financial Planning in divorce, especially the need to bring this element in to the equation early enough. However, having said that, I am very mindful of the pressures that Lawyers are working under, in terms of time and costs, not to mention Judges and Barristers.

With that in mind, I am very interested in Collaborative work and Mediation for obvious reasons. My mission, I suppose, is to get a similar level of involvement in the Ancillary process, early enough to do a proper job.

I’m also mindful of the appalling reputation that my ‘Profession’ has, for sharp practice and aggressive selling. I didn’t always work in this industry and I tend to share most peoples view. However, things are improving I hope, as the well qualified, fee based end of the industry seeks to separate itself from the likes of the Banks and Direct Sellers.

The Resolution Accreditation has made all the difference for me personally. Fellow Resolution members have been extremely welcoming and generous with their time and the POD meetings are invaluable. I would urge any Financial Planners who are interested in this work to get on the list for the training.

So, my hope is that we find a way to make this work for the benefit of our Clients. Hopefully this blog will play its part.