International financial advisers have some way to go if they are to provide a truly customer-focused service, the chief executive of Old Mutual International, Peter Kenny, said.
Speaking at the International Adviser Fund Links Forum on Thursday, Kenny said life companies also had a responsibility to call out bad behaviour that was not in the best interests of the end client to encourage IFAs to make the changes that the industry needed to be sustainable.
“I think the advice industry in the international space needs to undergo quite a lot of change.” Although he added: “I’m really encouraged that there is already quite a lot of change going on.”
He said the industry, which included fund managers as well as the life companies, can help by reducing profit margins on products and not creating special share classes with high fees.
“The asset managers and the life companies need to stop generating food so the distributors can learn to generate their own.
“They must learn to feed in a different way,” he said.
Customer focus lost
Kenny said the cross-border life industry had come a long way over the past 35 years but added: “There is a lot of me personally that is not very proud about what we as an industry have done over those past 35 years.”
“Somewhere in our pursuit of gathering assets and building AUM, we lost sight of the customer.”
Kenny singled out the example of IFAs recommending to clients that they put a large proportion of their savings into structured products in order to generate fees for themselves.
“Somebody who has worked hard all their working career and then entrusts us with their money and it gets put 100% into a structured note linked to some abstract index purely designed to generate fees, that has happened in our industry and the sad thing is that is still happening today.”
He called on fellow members of the life industry to take responsibility for bad adviser behaviour.
“The view that we just provide the product, we just provide the wrapper, I don’t think that’s acceptable and we have a responsibility to say what is wrong,” he said.
Regulation welcomed
Kenny welcomed new regulations like the Conduct of Business Code, which is due to come into force next year and includes things such as full commission disclosure.
“Commission disclosure makes perfect sense and should’ve happened years ago,” he said.
Kenny, who was recently promoted to his current role, said his goal was to try and make the operation more customer focused.
“For us to be a sustainable, profitable business going forward I think we need to bring the customer front and centre of what we’re trying to do as a business.”
