It's OK to be a capitalist 

Recently, I found myself being slagged-off on FaceBook by someone who was neither a friend or a direct connection.  It was because I had the temerity to articulate a viewpoint which sounded a bit...you know...capitalist.  In our current culture, sometimes it feels as if admitting some kind of sympathy for capitalism, as a system, is rather like confessing that one has a penchant for strangling kittens.  The sheer ferocity of the rebuke flung at me was clearly intended to convey the impression that the only economic system that a moral, thinking person could possibly endorse must come straight out of Das Kapital.  Any other perspective must clearly mean that I must be a member of the Undead, the unthinking, lumbering bigots who support Trump.  And what could possibly be worse than that?

Actually, I really don't think that all the options in life need to take this rather crude binary form.  And given that one of my favourite books over the years has been E. F. Schumacher's 'Small is Beautiful', I was left feeling somewhat aggrieved by these calumnies, especially given the subtitle of the book:  "A Study of Economics As If People Mattered."  As if.  Sometimes in the modern financial services marketplace, it is quite difficult to see how the real needs of people slot into an over-regulated, over-complex, unaffordable, unsustainable, utilitarian system.

So, Thank God for IFAs:  that's what I say.  Because IFAs are independent of those Evil Financial Institutions.  IFAs are entirely free to represent their client's individual needs and interests.  IFAs are the St. George's, slaying the bureaucratic dragons of insurance companies, hiding behind their callcentres and impenetrable paperwork.  IFAs are the modern financial prophets, making sense of a future that seems increasingly opaque or uncertain.  IFAs are mountain rescue teams, lifting people off the cliff-edge of dependency or demise.  Through their care and due diligence, IFAs are the prospectors filtering the gold out of all the dross out there.  I'm on a bit of a roll, but perhaps you can think of even better similes.

But, if you're an IFA, you're also a capitalist.  That means that you agree to deliver a specific product or service of an agreed quality at a certain time, and according to certain conditions.  And, in exchange, even if he or she occupies a position left of Stalin, the customer has to play the capitalist too - because they agree to provide an agreed remuneration within an agreed timescale.  It all feels faintly subversive, but that's the beauty of capitalism.

This model of service is dependent upon only two things:  (1) Is there a perceived value for the service you are providing, which justifies the fee, and (2) do both parties actually possess the intent of acting ethically?  This bipartite characteristic simplifies the whole model enormously.  It is not enough for the IFA to have a 'value-based' proposition - the nature or quality of that proposition must be such that the fee payable represents 'value' to the customer.  This is one area where the FCA's RDR initiative does make sense because the old commission system had 'broken' that particular half of the equation, so it was possible for levels of Adviser remuneration to bear no relation to the perceived benefit delivered to the customer - although I appreciate that this anomaly could well work in quite opposite directions.

And then, secondly, there is the ethical dimension.  Without a presumed ethical basis underpinning the delivery of service, it is possible for either party to screw the whole thing up, and we end up with a broken capitalistic system.  Which is kind of what we encounter a lot of 'out there' in various marketplaces.  Presumed ethical intent has to be present within capitalism, whereas Marxism disposes of that requirement as a basis for functionality.

So, how's your capitalism, then?  Is it working, or broken?  Are you charging realistically and fairly for the service you deliver?  Can you demonstrate the value of your proposition in such a way that the client concludes that your fees are reasonable?  How do you go about articulating your proposition to the customer?  Get the answers to these questions right, and you have a business which will trump the competition.  
 

Kevin Moss, 24/02/2017