Financial regulators need to “step back from creating new rules and regulations over the next two years”, James Pearcy-Caldwell, chief executive of Aisa Group, told International Adviser.
Speaking in late March, he said: “To me, when you’re in a situation like the coronavirus crisis where the rules are almost impossible to follow pragmatically, it is reasonable to expect your regulators to allow for that.”
He quickly added that it doesn’t mean walking back current regulation.
“They should absolutely continue to investigate areas such as pension transfer mis-selling and stop phoenixing.
“What I am saying is that they should not be creating new rules at the moment that will impact on an industry that is going to be very badly hit.”
In a recent follow up conversation, Pearcy-Caldwell said he was “genuinely pleased” that regulators seem to have done exactly that.
Fee focus
Since inception in 1999, Aisa has been fee driven; so, it is not surprising that Pearcy-Caldwell implemented the same charging structure when he set up Europe-based network OpesFidelio in 2013.
“Commission-driven models really do not work well in downturns,” he said. “I know this from personal experience, having been in the industry for a long time.
“People who work on commission rely on new business often face-to-face. If you take that away, which is what is going to happen until virus transmission reduction has been solved, you take a massive hit financially.”
Advisory businesses that also outsource their investment proposition to discretionary fund managers could also face challenges.
“They are in trouble because clients will be looking to understand why their money is going down,” he added.
“I have been here before on this one as well. Clients are going to ask ‘why am I paying you 1% when the DFM has lost me 20%?’
“That doesn’t happen when you have an inhouse proposition.”
Tech is not a magic wand
Having built a CRM system called Trove, Pearcy-Caldwell is a big supporter of the benefits that technology can bring to a firm.
But that doesn’t mean it is the answer to every problem.
“My firm has been using Skype and Zoom for meetings and conference calls for a long time. And I can tell you, it is really difficult to keep track of group meetings.
“It is still easier to be in a room with a group of people for two hours having a conversation. So, I can imagine things like investment team meetings could be badly affected.”
Being proactive
When it comes to steps that advisers can and should be taking now, Pearcy-Caldwell has a few suggestions.
If you take the tragic loss of life and job losses out of the equation, those on the cusp of retirement are “one of the groups that will be most affected by the crisis”.
“Advisers with clients set to retire in the next two years must either go safe with investments now or consider the possibility of delaying giving up work.
“The second thing, from a financial adviser’s point of view, is considering how they will deal with customers over the age of 60 and keep up with regulations until a solution to the issue of social distancing and virus transmission reduction have been solved, because the idea of going and meeting clients has gone out the window.”
Financially, firms and advisers are also going to have to cope with dwindling income streams.
“As such, they should be making plans accordingly within their own setups.”
Also, any business still operating on a paper basis risks potential contamination, so those that have not already made the jump to digital need to do so in short order, Pearcy-Caldwell added.
