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The end of the innocence

When the Eagles recently visited our shores, I was one of the first to book my seat for a trip down memory lane with songs I still know off by heart.

The title of this article comes from a song on Don Henley’s solo-album. It came to mind when I was contemplating what has happened in the industry since the turn of the century.

Over this period, our industry has certainly lost most of its allure, and sadly so. A lot of experienced advisors are saying that they do not enjoy their careers anymore. Many are leaving the industry.

Remember when the days were long
And rolled beneath a deep blue sky
Didn’t have a care in the world
With mommy and daddy standing by

The first signs appeared when the product houses started “delegating” costs and services to advisors. Running a practice now called for far more than just a car and a phone. Setting up a home office, and maintaining it, became a substantial financial liability to those used to being serviced in all respects by providers eager to get their business. Most of what remained bit the dust when legislation aimed at curbing conflict of interest saw the light.

When “happily ever after” fails
And we’ve been poisoned by these fairy tales

A succession of legislative interventions followed, all aimed at ensuring that consumers would get a fair deal. A major problem with the implementation of these laws, was that it was relatively new in a South African context. While overseas models were used and copied to formulate our own legislation, it did not always take into account the vast difference between local demographics and the societal make-up in the UK and Australia. Many critics are also of the view that the regulations are based on a one-size-fits-all principle, and does not differentiate enough between the various products it aims to regulate.

But now those skies are threatening
They’re beating plowshares into swords

It would not be amiss to say that many advisors are currently feeling threatened by what they view as an avalanche of legal requirements that they have to adhere to, while still trying to earn a living. Many have seen a drop in real income amidst escalating overheads brought on by amongst others, levies, compliance costs and the impact on productivity in having to prepare for regulatory examinations.

For many advisors there are only two options: fight or flight.

Thus far, it appears that those who went into the gunfight with a knife did not enjoy much success.

A substantial number of advisors adopted an “ignore it, and it will go away” attitude:

I know a place where we can go
That’s still untouched by man
We’ll sit and watch the clouds roll by
And the tall grass wave in the wind

This does, unfortunately, not address the problem. With deadlines looming, we find that intermediaries are becoming more and more frustrated as they sense that they are being driven into a corner, with no way out.

Who knows how long this will last
Now we’ve come so far, so fast

The harsh truth is that change is here to stay, whether we like it or not.

Offer up your best defense
But this is the end
This is the end of the innocence

A sad outcome of what has transpired since 2000, is the substantial loss in experience as scores of older advisors retire, or find other jobs. Replacing them with equally equipped intermediaries will not take years. It will take decades, if at all.

The provision of value-adding financial advice is at least as much reliant on following the right procedure as it is on knowing the market, your client, and what product will work best.

Having achieved 100% in an exam on a golf instruction book will not make me a Tiger Woods overnight.

Armchair warriors often fail
And we’ve been poisoned by these fairy tales

Quo Vadis?

Perhaps the answer lies in going back to why it all started: protection of the public.

Will the consumer of financial products be better served by call centres and inexperienced intermediaries who make all the right noises and follow the correct procedures? The question is, clearly, rhetorical.

The answer lies in acceptance of a give and take approach. On the one hand, acceptance of the need for change by intermediaries. On the other hand, comprehension of the practical plight of the modern day advisor. This may yet lead to an outcome beneficial to all. The major challenge to such an outcome is the little time left to implement it.

Whether we like it or not, for those of us who spent a lifetime in the industry, the words of another Eagles song, “Hotel California”, holds true:

You can check out any time you like
But you can never leave

It is in our blood, you see.

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