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Paperwork… tell me honestly, do we actually need it all?

6 February 2018

Richard Philbin, chief investment officer, Wellian Investment Solutions, says he understands the need for compliance and appreciates the role of his compliance officer but he bemoans the mountain of paperwork under which the financial services industry suffers. 

My daily commute consists of a short walk to the local train station, a 25 minute train journey to the office and then a 25 minute walk from Euston Station to our lovely office in Mayfair. My walk is my feeble attempt at keeping an “exercise” regime in my life and my Fitbit reminds me when I’ve completed my 10,000 steps per day.

Once I’ve sat down on the train (usually the 6:05am or more usually the 6:22am) I start working – using the time to read – that could be emails, articles, white papers, research views, analyst recommendations etc. Stuff that I’ve amassed during the day that I haven’t read whilst in the office and this helps reduce the old inbox. On the walk from the station to the office I listen to podcasts. I listen to a wide number of podcasts, most of them are investment or business related. I’m happy to share one or two of them if you are happy to reciprocate accordingly.

I like podcasts for a couple of reasons. They are usually both time relevant as well as timeless. I like them because they can last anywhere between 5 minutes and an hour. I like them as I can get a quick precis, or a deep dive into a subject or topic as there is a lot of information being portrayed to me. (Not sure my boss would appreciate me sitting at my desk reading a single document that lasts an hour…) I like them as they are an efficient use of my time whilst walking the streets of London to the office. I like them as the amount of words per minute you can hear, versus the amount you can read is more and therefore you can take in a lot more information. I like them as interpreting words can be different when you read them as opposed to hearing them and thus a completely different view can be garnered. I like podcasts.

One Podcast I listen to very regularly is from Goldman Sachs. It’s available on all good (and probably some not so good) podcast outlets and most of the interviews are really informative, educational and interesting.

But, this is where I get a little mad with our wonderful profession. “Paperwork”. Don’t get me wrong – I think operating in a regulated world helps all parties involved. I think the profession needs compliance. I think our profession has benefitted from compliance and regulation. Compliance is a central tenet in the investment decisions we make. I even like our compliance manager (even if he is an Arsenal fan) but I completely abhor how everything we do has to be checked and double checked. Everything we do in life involves risk. Not always a risk to capital, or our lives for instance, but what about “buyer beware”? A potential client – even if undertaking an execution only portfolio on a platform is given reams of paper to read and understand and sign. A potential client using an intermediary is given even more. In an ageing world where the need for financial services products is increasing, combined with fewer practitioners and an ever increasing compliance burden we don’t make it easy (or easier) on ourselves.

I am sure that there are lots of readers of this who whole-heartedly disagree with what I say and use the argument that paperwork protects all parties and limits liabilities thus actually making the profession more efficient, but once again – buyer beware. Of course, clients shouldn’t be sold something that is unsuitable or irrelevant, but how many times have you walked into a car dealership with one thing on your mind only to walk out with something completely different, or with extra features and warranties? How many questionnaires were completed with regard to “suitability” or “attitude to risk” when it comes to buying the car? Most people spend more money buying cars than they do on investment planning anyway, yet they have much less to sign – even less if they are buying the car for cash rather than on credit….

At the end of EVERY Goldman Sachs podcast there is the following “disclaimer.” To me, this podcast is akin to an advert. I’ve taken the liberty to write it down below (word for 176 words). Just count how long it takes to read. Just think how many lawyer hours were taken to have this used at the end of each and every podcast? Just think who pays for those lawyer hours..
“This podcast was recorded on xx xx xxxx. All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced in whole or in part. The information contained in this podcast does not constitute research or a recommendation from any Goldman Sachs entity to the listener. Neither Goldman Sachs or any of its affiliates makes any representation or warranty as to the accuracy or completeness of the statements or any information contained in this podcast and any liability therefore including in respect of direct, indirect or consequential loss or damage is expressly disclaimed. The views expressed in this podcast are not necessarily those of Goldman Sachs and Goldman Sachs is not providing any financial, economic, legal, accounting or tax advice or recommendations in this podcast. In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Goldman Sachs to that listener, nor to constitute such person a client of any Goldman Sachs entity.”

Moving on from the car dealership scenario to television services offered by Virgin Media. I recently tried to switch provider from Sky to Virgin as I felt I was paying too much and wanted faster fibre. Unfortunately I didn’t live in a cabled area and thus couldn’t actually sign up to the service. Of course we all know there will be paperwork to be signed when changing provider. A Goldman Sachs podcast is an advert in my opinion, just like the Virgin TV one. It might make me want to look at their services closer – sure – but I need to do lots more due diligence as and when I want to make that decision. At that stage I’ll have to look at the paperwork and understand what I’m getting myself involved in. In the meantime, the Virgin TV “disclaimer” is THREE words – “Legal stuff applies”. Why can’t our profession do this?

In a world where (until only a few weeks ago) Twitter only allowed you to promote your thoughts and products in 140 characters (now it allows 280) how can Financial Services appeal to the new generation of investors, savers, planners and clients? Taking the Goldman Sachs example into the Twitterverse, this is what could be said…

“This podcast was recorded on xx xx xxxx. All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published or reproduced in whole or in part. The information contained in this podcast does not constitute”

…leaving no space for either (a) the rest of the disclaimer, or (b) the opportunity for the company to say anything about what they wanted to say in the tweet…

I will absolutely reiterate that we need compliance. We need to be able to promote products and services to a wider audience than present. Most financial products are regulated. Governments cannot afford to provide pensions anymore – the PAYG system is broken. Individuals need to look after their own futures and provide for their own retirements for example. There is a fantastic profession – full of massively educated and competent advisers (both tied and independent) that can meet the requirements and objectives of the individual. They want to deliver for clients to the best of their ability. Of course there will always be the odd bad apple. There will always be the car that is sold that always breaks down. There will always be the train service that runs late, there will always be the unexpected bill, there will always be the leaky pipe, or the cancelled flight, but I take the risk of buying the car, getting on the plane, having to call an emergency plumber out and so on. There will always be: Buyer Beware. Ignorance shouldn’t necessarily be a defence.

The profession has changed dramatically over the past couple of decades that I have been involved in it, and probably in compliance more than any other aspect. Regulation and compliance is vitally important to running a smooth business and providing professional standards – raising the quality of advice and adviser, but in all honesty why do we need all the amount of “paperwork”?

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