There is a similarity in argument about reducing the legal blood-alcohol thresh-hold and the way many financial advisers feel about regulation.
If you are in any doubt about the anger and frustration that many financial planners have towards regulation just sit down and read the comments threads on recent goodreturns articles about the recent statements from the Securities Commission. These pretty predictable comments exhorting advisers to hurry up and become AFAs are being attacked in the comments sections pretty sharply - with comments varying as they do from those that are well informed, to those that a just angry.
I feel that it is important to remind the reader than in discussing some of those feeling here I am, in this post, deliberately choosing to not evaluate those views. I'm just sharing them and exploring their underlying rationale.
To summarise heavily, the adviser's charge sheet against the framers of regulation is that
1. It fails to capture the 'true' baddies (real estate agents, companies that sold apartments that were never built, property coaches, defunct finance companies, their trustees, etc.) - and the news is that they seem to have 'got off' scot free.
2. The Securities Commission should have done a better job of policing these folk, so it's at least partly their fault
3. Product providers that let down advisers with poor product, over-optimistic risk assessments, etc.
4. The rules don't recognise the 'good' planners / advisers sufficiently - including the lack of recognition for experience etc.
5. Various other kinds of advisers have been let off the hook - with broader exemptions for real estate, legal, and accounting than were originally envisaged.
I can't think of a single sector that was involved in the Global Financial Crisis that has come through untouched by some law change - no matter how innocent a bystander it might have been (think the revisions to prudential supervision for life companies) - but that doesn't impress those on the comment thread. Even the Securities Commission will go through its own upheaval as it becomes part of the new Financial Markets Authority. But today is not the day for arguing against these claims. Consider briefly, for balance, the kernel of truth within them - it's wise to do that.
An oft-quoted illustration is that of the billions lost in finance companies between 2/3rds and 3/4qtrs were direct investments - not handled by advisers at all.
This is where the similarity with the blood alcohol level change comes in. Setting aside outright shysters, I am also quite certain that plenty of slightly messy financial advice has been given. Call this the equivalent of the driver that hops in his car after four drinks on a Friday night. He's damned grumpy about the proposed reduction to two drinks -- although that would certainly save lives, he makes a valid point when he shows us the stats that virtually all the deaths are caused by drivers that are well over the current legal limit.
Finally, a brief aside on the future. The weight of compliance and risk on adviser shoulders now is such that alternatives are looking good. Although QFEs look like being less popular than originally thought a solution that is much more popular than originally envisaged is the 'information only' sales process. No advice here. This will receive more attention. QFEs may yet gain popularity too. RFA status has received a huge boost. Perhaps all those 'missing' AFA applications are from people who may just choose to work in an alternative way. Perhaps what we are seeing is the reduction in the number of advisers that was forecast.