The demands of the paraplanner’s role
A good illustration of this is the extra demands under MiFID II.
Just to recap: advice firms are required to disclose all costs and charges that relate to their retail recommendations since the new regulation came in. They must give an indication of the expected costs and charges. And these need to be provided before advice is given.
The actual costs and charges need to be supplied after the advice is given (ex post), and where applicable on at least an annual basis. The costs and charges need to be aggregated and shown as a cash amount as well as a percentage.
The rules state the following three points must be disclosed:
- all one-off and ongoing charges, and transaction costs, associated with the financial instrument
- all one-off and ongoing charges, and transaction costs, associated with the investment service
- all third-party payments received, and the total combined costs of these three categories.
Firms must disclose this along with an illustration that details the cumulative effect of the overall costs and charges on the return.
And on top of all this, the ‘Retail Distribution Review’ (RDR) rules on adviser charging continue to apply alongside MiFID’s costs and charges requirements – augmenting the level of complexity involved.
These rule changes have added an extra burden to the advice and review process. While some firms have turned to technology to produce these reports, evidence suggests the paraplanner’s role has grown in importance and complexity since these rules were introduced. Unlike automated reports, a human paraplanner can prepare annual reports for clients that genuinely are personalised.
Change is not new and has contributed enormously to the evolution of the paraplanner’s role. Thinking back over the last decade we have seen many changes and amendments in regulation including RDR, MiFID II, ongoing reviews by the FCA, changes to the process for pension transfers and increasing costs for professional indemnity insurance.
It would be naive to imagine that we will not see an equal amount of change in rules and regulation over the next ten years. Financial advice firms will come to increasingly rely on employees who have a good eye for detail, who are able to grasp, fully understand and interpret the ongoing changes in the context of existing regulation. Only then can a firm offer a rock-solid advice process. Only then can a firm remain successful.
Because unless a firm has ‘a safe pair of hands’, the risk of things going wrong becomes more real and the cost implications of that are potentially so great they might threaten its very existence.
Looking at it that way, you have to ask yourself whether a firm can afford not to invest in developing, rewarding and retaining its paraplanners. Taking a professional qualification in paraplanning is a good first step.
