We all love a bit of lively debate every now and then. It can often reveal previously obscured reasoning that sheds new light on matters. Well considered and informed views are invaluable, otherwise we risk living in a world where thoughts and views remain unchallenged and cognitive dissonance thrives. In the social media world it’s referred as ‘group-think’.
Challenging preconceived views is absolutely relevant within the financial advice sector where advising clients involves more than just establishing financial circumstances, but extends to informing and educating clients, challenging their misconceptions and even confronting denial.
So when advisers using the Harbour suitability system disagree with its recommended client profile, we regard it as a good thing. In fact it demonstrates clearly that the adviser is the one in control.
Any tool profiling client attitude-to-risk, or more properly investor suitability, can never be 100% accurate. While Harbour goes beyond the limitations suffered by ATR tools and covers Capacity For Loss, Investment Horizons, Volatility Tolerance and much more in its questionnaire, there will always be personal circumstances and other factors that no questionnaire can be expected to cover.
It’s why we designed-in Harbour’s Adviser Override; it’s a control mechanism that prevents firms falling foul of the examples highlighted in the FCA's last thematic review. A review that finds one third of business reviewed as wrong with another third inadequately documented to such an extent that the soundness of advice could not be proven undermines the probity of financial advice in the eyes of the public.
We, and I presume to include external compliance auditors and the regulator, will want to examine in closer detail when the adviser has disagreed with Harbour. Our KPI and MI reporting will show when, how often and for what reason, an adviser has overridden Harbour’s recommendation.
So when advisers disagree with Harbour, we really do regard this as a good thing because the adviser should know better than us – after all, it’s the adviser’s client and they should know them better than anyone or anything else.
We know that advisers disagree with Harbour’s suitability recommendation 21.5% of the time. We also know that of the total overridden, 89% are overridden into more cautious profiles for reasons of reduced capacity, reduced need or temperament and that 11% are overridden into suitability profiles associated with higher investment risks. Aren’t we concerned? No actually we’re delighted and it means that advisers who use Harbour are able to demonstrate clearly that they’re giving consistent advice based on clients’ needs.
Lively debate can be enjoyable even with compliance consultants, advisers and even the perhaps regulator. However, it’s great to be able to back one’s rationale with facts and data; that’s something that ATR tools lack; it’s their loss - they simply don’t have the capacity!