Laws properly enforced and real financial penalties for executives who destroy value would be enough in most sectors.
Instead, the authorities prefer ever more rules and regulations.
In financial planning it adds to costs, makes advice cumbersome, possibly less effective than it could be and the entire prescriptive process is off putting to many – both those who would benefit as clients and those that could be the excellent practitioners.
On top of this increasing amounts of time and energy are exerted by interested parties on both sides of the argument.
As a result of where we are in financial planning, I have two compliance consultants and half Sarah’s time is spent on such matters.
Could all that time, energy and resource be put to better, more productive, use? Better client outcomes perhaps?
Masses of rules and regulations also mean more ways in which we might fall foul of them. The result of which is that professional indemnity costs and compensation levies have gone through the roof.
Next year marks 30 years of me working in pensions / financial planning. The regulations and their costs have never been so onerous and client outcomes so bad. There’s a strong correlation and, also, I believe, a causation.
Rules cause people to focus on compliance and/or work around them often to the detriment of all of society. That was the fundamental cause of the financial crisis which we will all suffer from for decades to come.
As I stated above, properly enforced laws and real financial penalties for executives who destroy value would have been enough.
I believe the issues are easily solvable, and always have been, sensible regulation of the products and investments would be a start.
Why am I writing about this? Because this appears to be the path we are blindly following in many aspects of our lives.
Health and education spring to mind – they appear similarly dysfunctional and drowning in a sea of regulation.
The nature of all heavy rules and regulations is to say “we, the non-practitioners, know better than you and we don’t trust you” what a regime to have to work under.
So, when I saw a post saying, “If you were the education Tsar, which 5 books would you mandate all high school children read”, my response was immediate: “None, let the teachers teach”
Do you or I know better than the teachers, doctors? Or the financial planners and accountants and solicitors? Why don’t we let them get on with it? Is the alternative of regulation and oversight producing better results than otherwise?
If yes, show me the proof.