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Choose Your Poison

Our mission as financial advisers is simple: helping clients achieve their cherished life and financial goals, ensuring they don’t run out of money, and defending them against the silent, lethal force of inflation. This is our duty. It’s what we signed up for and why we do what we do every day.

However, we increasingly find ourselves caught between doing what we know is right for our clients and bending to a compliance system designed to serve itself rather than those we have a duty to protect.

The stakes are our clients’ financial futures, our livelihoods, and our integrity. Enough is enough. It’s time we stood up and called out the problem for what it is.

Standing between the adviser and their mission is a compliance framework obsessed with box-ticking, over-simplified metrics, and irrelevant assessments. This system has conjured up imaginary dragons for us to fight, and we’re expected to play along.

The first of these dragons? “Attitude to risk.” This concept boils down to a fixation on volatility—just one flavour of risk, and frankly, not even the most important one.

Let me make this clear: volatility is not the villain. It’s not a bug in the system; it’s a feature. It’s part of the natural rhythm of investing. Volatility is the price we pay for long-term growth, and yet we’re forced to act like it’s a fire-breathing monster we need to eliminate. Volatility must be understood and respected, but let’s stop treating it like the enemy.

The second compliance dragon is the so-called “capacity for loss.” This concept assumes that our clients will panic, sell out, and lock in losses whenever a portfolio drops temporarily. This has never happened with my clients in nearly two decades of advising real humans. Even during the chaos of COVID-19 in March 2020, when the markets fell off a cliff, clients didn’t crystallise losses. They acted with equanimity, stayed the course, and reaped the rewards when the markets bounced back (as it has always done). Yet, we are still told to base our investment strategies on this absurd concept.

Our fellow advisers face real dragons, but they aren’t the ones compliance is currently obsessed with. The true enemies are permanent capital loss, inflation, and low investment returns due to asset misallocation. These are the risks that keep us up at night, the risks we should focus on, the risks that matter. But because they aren’t as easy to quantify or stick on a spreadsheet, compliance turns a blind eye and leaves us to battle the real dragons ourselves.

The result is that we are being asked to compromise our duty to clients for the sake of ticking a box. Our compliance system needs an overhaul.

Advisers and compliance teams share a common objective: safeguarding our clients' financial well-being. While we may sometimes disagree on the methods, our ultimate goal is the same, and I recognise the vital role compliance plays in maintaining the integrity and trust of our profession.

However, we must refine our strategies to ensure they align more closely with clients' real-world needs. The ultimate risk to avoid is dying before your money does and having to go cap in hand to your family or the government.

Let's continue this conversation with a spirit of collaboration and mutual respect. By working together, we can design frameworks that uphold regulatory standards and equip us to address the true risks our clients face—permanent capital loss, inflation, and inadequate long-term returns. Through dialogue and innovation, we can develop solutions that balance necessary compliance with the practical, human elements of financial advising.

If we can work together to build a bridge between our roles, we can foster a future where compliance elevates our service rather than hinders it. In doing so, we can protect and enhance our clients' financial futures, ensuring they are well-served both now, and the future lives they need to fund.

📰 Articles & Blogs

Every Financial Adviser Needs to Tell Great Stories [4 minutes]. Can you tell these five stories?

Can Financial Planning Really Be Life-Changing? [4 minutes]. Why we do what we do.

All I Ever Told You [4 minutes]. "Not only did they ridicule those who remained long during the corrections, they lied about the silver bullets and secret elixirs that would have “kept you safe”."

Quantifying (More Accurately) The Real Impact Of A Financial Advisor’s Costs On Their Clients’ Nest Eggs [29 minutes]. A takedown of the critics of financial advice fees.

Bad Timing Cost Fund Investors 15% Of Gains Over Past Decade [4 minutes]. A tale as old as time.

Risk Tolerance Questionnaires: Useful or Pointless? [4 minutes]. The challenge that really needs solving.

🎧 Podcasts

TRAP 55 - Slow Motion Wealth Destruction [82 minutes]. The TRAP pack discuss the cultural apathy towards investing and dives deep into the financial habits that may be quietly eroding wealth over time.

The Client New Year's Letter You Need to Write Now [38 minutes]. A well-crafted New Year’s letter can significantly enhance client relationships by showcasing the value of the services provided and building excitement for the upcoming year.

📚 Book Recommendations

The Soul of Wealth: 50 reflections on money and meaning by Daniel Crosby. 50 short essays that explore what wealth is and provide practical suggestions for how to change your thinking and your actions in small, powerful ways for a wealthier life.

🖼️ Visuals

Ranked: The Best Metro Systems Across European Capital Cities

Visualizing S&P 500 Performance by Presidential Year

Infographic: How Many Active Funds Beat the S&P 500?

🍿 Videos

Why Good Advice is Hard to Follow

At Humans Under Management Dublin 2018, Gary Connolly presented on the complexities of following investment advice. With 20 years in the investment business, Connolly explores the emotional barriers clients face when making financial decisions.

The talk addresses why clients often ignore sound investment advice despite understanding it intellectually. It delves into the psychological factors that influence decision-making in financial contexts.