Handling regulatory uncertainty

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The regulatory uncertainty level amongst advisers is just about at an all time high.

It’s not just new rules that create the uncertainty; it is the shift to principles-based or outcome-focussed regulation that doesn’t have the definitive and prescribed series of “thou shalts” and “thou shalt nots” which creates the most uncertainty.  Then layer in a few minor things like pandemics, war, inflation, social justice demands for self-employed people to earn less for the work they do (yeah; I’m referring to the incessant demand for lower commissions or fees from folk who make their entire living off other peoples money rather than by creating anything themselves)….and it is hard to figure out some clear ways ahead for many financial advice businesses right now.

The most common question in the business that advisers are asking their counsellors and coaches is “what should I do?“

Get clear about what you want from your business.  That’s the answer.

Uncertainty – lack of clarity – is the killer of progress.  It is uncertainty that causes stress, and waste, and inefficiency and lost opportunity.  Most advisers seem to think change is what is causing those things, but it is really uncertainty.  But uncertainty about the future is not new.  In fact it is the norm.  It is the way the world has always been, and that isn’t going to change until somebody gets a really good crystal ball.

Change isn’t the problem either.  Change is normal…it happens to us, and around us, and because of us every single day. Change is not threatening and change is not a concern really.   Change is the constant state of the universe we have always inhabited.

The uncertainty which is the real issue is our own uncertainty.

I have taken to referring to one of Carl Richard’s superb drawings again in recent times as we work through the issues of great uncertainty in the face of more yet-to-be-detailed-regulatory changes:

The problem is a lack of clarity by practitioners on what sort of business it is they wish to build.  What sort of business they wish to build should be a reflection of what sort of life they wish to lead, because the business should reflect how they want to live and engage with the world around them.  So it is “unclear goals” that is actually the problem.

The answer to figuring out what any proposed changes mean for you, and what you should do about them, lies in getting absolutely clear about what it is you want your business to look like and what it is you want your business to achieve.

If we begin from the premise that your business should be founded and structured to deliver what it is that its owners want, then it becomes a lot easier to figure out what an appropriate response is to changes in licensing or advice requirements or any other external pressures.  If for instance you want a business that simply delivers a consistent income and a lot of time off to play golf or sit on a beach, then building a business which is minimalist in advice and product lines and which can create a lot of similar transactions with a reasonable profit margin each time is a good thing.  That sort of business might be called a “factory” by others in the industry, but who cares whether others like the model?  If it is delivering solutions in a manner which at least a part of the market wants and at a price they feel reasonable AND it delivers the outcome that the practitioner wants from their business, then that strikes me as a very good thing to do.

Another practitioner may need high levels of professional challenge and personal fulfilment from delivering clever bespoke solutions to complex problems. They will be heading down a very different path in terms of the type of practice they look to build and how they respond to regulatory change.

Neither business model in these two simple examples is “good” or “bad”.  Neither is “right” or “wrong” – other than one will be right for some, and wrong for others.

The first step in handling your particular regulatory uncertainty really is getting clear about what sort of business it is that you want to be building.  And that decision should be driven by defining how you want to live, or what sort of life you want to have.

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