Getting there safely 

If our driving behaviour was entirely influenced by a consideration of risk, we'd probably all be driving Volvos.  Of course that isn't the only factor which impacts upon our vehicular buying decisions, but given what we know of the possible consequences of driving, one might argue that the issue of risk is a significant issue.  Our children, sitting in the back seat, may have a very different focus ("Are we there yet?"), but the adult sitting behind the steering wheel is very mindful of what might go wrong, and just how much protection there might be, cocooning his precious family.

Risk, for the person who is driving the vehicle, is in fact a very significant factor - not merely a subordinate item on a checklist of possible concerns.  And, it involves a whole amalgam of issues: tyre pressures, currency of the MOT, build quality of the car, driving conditions, care and expertise of the driver...

I am using the act of driving as a parable of the role of the Independent Financial Adviser, who ought to be in the driving seat, not in the back with the client/passenger.  The person in the back assumes that all the risk-considerations are being dealt with by someone else, whereas the driver, unless he is asleep, is continually reflecting upon such issues, and factoring those into planning and behaviours.  This is, quite reasonably, the role of the IFA.  To include 'risk profiling' in a compliance checklist, to be ticked-off once completed, is to fail to take this responsibility seriously:  there is, in fact, embedded in the advice process a kind of ongoing collective meditation going on regarding the trade-offs between risk and reward - and that dynamic applies to pretty much any area of advice.

Of course, where it applies most sharply is when the adviser is assisting a client with the kinds of arrangements which may reasonably be categorised as 'higher risk'.  As each year passes, it appears that this category of product is steadily expanding in order to capture more and more arrangements that, previously, we may have regarded as a little dull or pedestrian.  It seems to us, therefore, that irrespective of the perceived degree of risk associated with different product-types, what matters is that each adviser firm has an excellent process underpinning their recommendations:  we've put a short video together highlighting this issue...
Our conclusion - and it is hardly a radical, or especially insightful one - is that it is the quality of your process which will determine how 'safe' your outcomes are.  IFAs which pay lip service to the advisory process, and skip over steps 1-3 in order to get to step 4 as rapidly as possible, are very likely to be generating client outcomes which one may accurately describe as 'unsafe'.

Over the years, we have been happy to support our Members when it comes to handling those 'more complex' arrangements (VCTs, EIS, Structured Products etc), and we have seen some excellent examples of how these matters have been handled in practice.  Equally well, there does appear to exist within some elements of the intermediary sector, an approach which lacks those methodical, proportionate and risk-minimising qualities, where the IFA apparently has his (or her) fingers crossed behind his back.  And that's never a great way to manage the journey.
Kevin Moss, 27/02/2014