Not enough hours in the day: Understanding the pressures financial advisers face
Lucy Mitchell, Associate Director, Smith & Williamson
I have the pleasure of meeting financial advisory firms all over the country. I meet with sole traders, large regional firms, networks and everything in-between. When I ask financial advisers about the challenges they face in the current climate, many different conversations ensue and many different topics are discussed in great detail. As you will no doubt appreciate, MIFID II has been at the heart of many conversations over the last few months.
However, the thread that links many of the concerns of those I speak with, is that in the current regulatory environment, advisers wish there were more hours in the day. This might sound familiar to many people in our industry as they have experienced regulatory requirements increasing and taking up more and more of their time. MIFID II is the perfect example of this. While high regulatory standards are of course important, it has created additional work load for us all but especially for those advisers who manage money in-house on an advisory basis. Jeff Bezos, CEO of Amazon, wassaying the following:
“I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two…”
My answer to the second question to advisers is, over the next 10 years there will be no more hours in the day and the regulatory environment will not have got any less burdensome.
Since the Retail Distribution Review (RDR) came into force on 31st December 2012, we have seen many advisory firms commit to either outsource their business to a discretionary manager or commit internally to manage client portfolios, many of which are managed on an advisory basis. In my view, in order to manage client portfolios successfully, whether through outsourcing to a discretionary manager or in-house on an advisory basis, you have to have a well-resourced team.
I am perhaps surprised, on occasions, to meet advisers who have all the responsibility for their clients’ investment portfolios on their shoulders and their shoulders alone. Their internal resources to manage client investments are limited. I can assure you that this piece is in no way an opportunity to have a dig, in fact far from it. I don’t doubt that those advisers that manage client money are capable of doing so but their lack of resource and support is a risk to their business and perhaps no more so than now under MIFID II.
The introduction of MIFID II, designed to offer greater protection and transparency to clients, has been in the making for 7 years. For many advisory firms, especially those that are well resourced, it only requires minor tweaking to their current processes and procedures. However, for those firms that are manging client portfolios on an advisory basis who are light on resource, MIFID II has been described as an administrative nightmare. The administrative burden under MIFID II will take up more time than ever, stretching limited resources to their limits. This may not be a concern for some advisers but if it is, there are many options available to you and your clients.
At Smith & Williamson our MPS is run by three dedicated MPS managers, with a network of over 55 investment professionals responsible for investment research. We are very fortunate to have such a large team of investment professionals contributing to our MPS models and this is something that can be taken advantage of by advisers. Our 6 models are available on a number of external platforms and are invested using a blend of investment trusts, open ended funds and exchange traded funds (ETFs). We manage the money so you can focus on your core client services. After all, there are only so many hours in the day.
Lucy Mitchell, Associate Director, Smith & Williamson
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
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