It’s All About “The Product”, Stoopid!

Values to Vision Financial Planning Ltd recently moved offices to the swanky commuter village that is Radlett, Herts, on historic Watling Street.

Nearby is another firm of Independent Financial Advisers. One of their advisers is revising hard to pass exams by the end of 2012; if he does this, he can continue to trade; if not, he can’t. Simples, eh? It’s all to do with the Retail Distribution Review (RDR) – please Google this if you want to find out more. It’s pretty tedious stuff.

In a moment of weakness I deigned to look over the pre-exam case study this adviser was sweating over. It was a depressing experience.

Matura (oral part) - during exam (Czech).


The case study consisted of a regurgitated “fact-find”: all the hard financial data that advisers make clients leach out under a hot lamp in a locked room (ah, the memories…). The exam questions test whether or not the adviser is competent in addressing the gaps said fact-find thus revealed.

Not, of course,  the really important “gaps”. You know, those central-as-to-why-we-live-and-breath kind of gaps, revealing the client’s real goals, aspirations, dreams.

No, we’re talking about the gaps that needed – nay, begged –  to be filled by “product”! Client doesn’t have a pension according to the fact-find? Then he needs a pension! Client doesn’t have an Investment ISA according to the fact-find? Then he needs an ISA!

Which leaves me to posit three exam questions of my own (don’t panic, there are no right or wrong answers lest we be judgemental) :

  1. To clients: would you take a prescription from a doctor who hadn’t done a proper diagnosis?
  2. To the financial advice sector: have we learnt nothing?
  3. To the people who write these exams: you do know this is 2012,  not 1992?

There’s No Such Thing As A Free Lunch…

One of the recurring themes in personal finance is the search for the Holy Grail: the investment that delivers superb performance without putting your money at undue risk. Such a utopian vision of investing appeals to our innermost emotional needs:

  • We want to have long-term prosperity.MADOFF FAIL
  • We want to be able to sleep at night.

Having just finished Diana Henriques’ superb dissection of the largest so-far-discovered private (as opposed to State) Ponzi scheme in history I’m reminded that whatever anyone ever, ever, ever says, risk and reward go hand in hand.

You want that unbelievable performance? Go get it. But it always, always comes with totally believable risk. Otherwise it’s a fraud, plain and simple.

Mind you, Bernie’s doe eyed expression would have you believe butter wouldn’t melt; easy to see how he fooled those clever hedge fund managers who rolled over for him…