At this week’s annual CISI Integrity debate the question about the honesty and integrity of Wealth Managers was debated with a packed audience of Wealth Management professionals. Now I use the word professionals, as one of the points raised during the presentations for and against the motion was the integrity of individual’s verses the industry and its operations. The need for a professional body in financial services to mirror that of Doctors and Lawyers was a point well-made and presumably one that fits the CISI objectives perfectly.

The debate was focussed on Wealth Management and not the wider financial markets, which of course kept out most of the thorny issues that society has with the financial markets. Nonetheless there was more than enough meat on the bone to provide the audience with food for thought. Not least was the rather strange distinction made that wealthy individuals need greater servicing and that in this way through philanthropic acts and investment the needs of the few would supply that of the many. This type of view is possibly one of the key reasons why most of society views Wealth Management as a tool for the privileged, not for all. In fact a point was made that people with only £25k to invest could not afford the fees and therefore had to find their own path, rather they target £2m or £3m assets. I am not sure if this attitude to the financial needs of society is what is needed today when we are facing a crisis in pension’s provision for decades to come.

Perhaps the most important presentation of the evening concerned the breakdown of the mechanism, which the Wealth Management industry is operating, rather than that of individuals within in it. Given that employees simply carry out the wishes of their employer, is it their job to question the integrity of the firm and risk losing their job? Who is ethically at fault the employee or the employer?

RDR has been introduced to improve the industry as a whole and has a concentration on professional capability and performance. This cannot be argued with as it’s an important feature of professional people able to supply their clients with top quality services. However as we find today the laws of unintended consequences can introduce some problematic effects of change by regulatory reform.

Along with the benefits of RDR have we actually provided a swings and roundabouts value where the old type servicing that was once enjoyed by the investor has been replaced with something less to their liking or needs?

On the whole change is a good thing and nothing should be left to stagnate, but as we have seen in the financial markets, change can often bring with it undesirable effects as well.

It seems to me that any services industry should focus foremost on its customers and have their needs at the top of the agenda. Rules and regulations should be geared to catch the miscreants and not deter or prevent firms or individuals from servicing the exact requirements of the investor. People employed by financial services firms should be trained to a level that enables them to carry out their functions. However, it’s impossible to train someone to be ethical any more than you can train to prevent a serial killer. You are either ethical or you’re not!

There was a narrow defeat for the motion that ‘UK Wealth Management is honest, open, transparent and fair’. This was somewhat of a surprise, as it was virtually admitting a lack of integrity but with some 200 people in the audience this was probably a fair enough percentage, to gain some idea of where the industry sits today. Unlike, one of the presenters that was urging the audience to vote for the motion, I found that the vote defeating the motion, showed an industry not resting on its laurels, but one aware of its weaknesses and past failings, and most importantly, an industry which is aware of how society views it; if not Wealth Management in particular.  Surely this is a small step in the right direction to tackling the many problems within financial services?