For someone who fell into financial services, Sir Alan Yarrow, Chartered FCSI(Hon), CISI Chairman, who was knighted in the 2016 New Year Honours for services to international business, inclusion and the City of London, has had a remarkable career. But his next challenge is a big one: changing the public’s perception of financial advice.
Chairman of the CISI since 2009, his role has recently expanded, following the merger with the Institute of Financial Planning (IFP) last year. The move added 2,000 financial planners and 30 corporate members to the CISI’s 40,000-strong roster of wealth managers.
Sir Alan’s career in financial services spans four decades, but it wasn’t his first choice. “When I was very young I wanted to be a vet, then an architect,” he says. “I almost fell into the financial sector by accident, but found it an extremely interesting, dynamic and rewarding subject. I could not understand why an architect would want to train for seven or eight years and still be at the mercy of the economic cycle.”
When it came to an interest in economics, Sir Alan – who spent 37 years as a financier, latterly at Dresdner Kleinwort – was first interested in “raising money for young, growing companies, which inevitably extended to raising money for larger firms”.
He adds that the deregulation of financial services in the 1980s, known as the ‘Big Bang’, further fuelled his interest in finance and the City. “I witnessed many new developments in capital markets after the Big Bang,” he
said. “I have found every day different, with different challenges, and learned something new every day.”
Culture change
This vast experience led Sir Alan to be appointed Lord Mayor of London in 2014–2015, where he was tasked with helping to repair the reputational damage caused to financial services by the financial crisis – damage that was still obvious seven years after its onset.
“I was acutely aware that seven years after the crisis, the financial sector was still going through a tortured rehabilitation and I felt it was important for us to accept the fact that we got things wrong and apologise, so we could go through a period of reconciliation with the people who felt they had been wronged,” he says.
Sir Alan is quick to point out that despite the wide-ranging reputational damage that the credit crunch and ensuing crisis caused, it was a small minority working within the sector who should shoulder the blame.
“The reality is, it was only a few people who did a lot of the damage, and the damage to the industry’s reputation affected a lot of people employed in the sector,” he says. There are more than 2.1 million people in the country who work in financial and professional services, with 350,000 of those working in the City, and 700,000 in greater London. Another one million people work in the sector outside of London. Sir Alan says it was equally important to rebuild confidence within the sector as well as repair the industry's reputation in the eyes of the public. “When I started, I was proud to say I worked in the City,” he said. “I believe it is our duty to put in place the foundations for rebuilding that trust and confidence for all those young people who work in the financial sector, so they too are proud to say where they work.”
Reputation and trust are key themes for Sir Alan as Chairman of the CISI, an organisation he has been involved in since it evolved from the London Stock Exchange 25 years ago. A
recent survey by the CISI on trust and culture change in banks shows that 50% of respondents think it will take more than ten years for the public to believe banks have changed their ways. For Sir Alan, part of the problem is that the public cannot distinguish between different parts of the financial services sector.
“In the public’s eyes, financial planners, advisers and wealth managers tend to be lumped together under the heading ‘bankers’,” he said. “Over the last 18 months we’ve been involved with a number of major international banks, with significant presences in the UK, demonstrating quite clearly that they are serious about achieving culture change. But why are they reticent about making the fact public? Training, we believe, should not be seen as a sign of weakness, but as a demonstration that a bank understands and accepts its responsibilities.”
Regulatory burdenIt is not only public perception that hinders the take up of financial advice in the UK. Sir Alan points towards onerous regulation, noting the higher regulatory costs and risks brought about by the Retail Distribution Review (RDR). These mean that “financial advice comes at a premium” and “advisers remain at risk from retrospective regulatory reviews with the benefit of hindsight”.
“The regulatory burden for financial planners and wealth managers needs to be addressed, which will then reduce the cost to the consumer of financial advice,” he says. “Research has shown that it takes at least 20 hours for a financial planner to ‘onboard’ a new customer. Some regulations have become gold-plated and this needs to change.”
Cost is also a problem for consumers with smaller pension pots, “not because the adviser is trying to maximise their profits, but because the regulatory costs and risks are too high”, says Sir Alan.
Of course, one of the main hurdles the financial planning profession has to overcome is consumer apathy towards taking control of their finances, and Sir Alan believes advisers and wealth managers are well placed to help in this regard. “One of the biggest challenges facing consumers regarding their personal finances is reconciling the very individual balance of ‘living for today’ and saving for the future, be it in the form of a pension, mortgage deposit, car, holiday or wedding,” he said. “Educating the consumer in a way that they can understand the value to them, their partners and families, generated by early personal financial advice, is a challenge.”
He believes the “financial advice horizon is too confusing for consumers” and will be even more so following the Financial Conduct Authority’s introduction of a new scheme for registering advisers, “meaning there is no longer one independent, central listing of financial advisers”.
Attractive careerThe financial advice landscape is in a state of flux with the introduction of guidance and robo-advice, but Sir Alan is convinced that nothing will replace “dealing with a real person who can fully understand and empathise with a consumer’s needs”.
By making it easier to work as a financial planner, and encouraging people to be proud to work in financial services, younger people will hopefully be more attracted to joining the advice profession. Marketing financial planning to graduates as a career choice is “very much on our radar”, says Sir Alan, who at 65 has no plans to slow down. The CISI uses its relationships with colleges and universities to “try to open the minds of teachers, parents and students to the attractiveness of financial planning as a career”.
Quick fire Q&A
When I was young I wanted to be ...
A vet
I'd tell my teenage self ...
Anything is achievable if you show focus, determination and enthusiasm
My biggest extravagance is ...
Wine
My favourite film is ...
Gladiator
My favourite singer is ...
Rod Stewart
My favourite drink is
A good claret
The thing or person who makes me laugh is ...
Michael McIntyre
The charities closest to my heart are ...
Mencap, which works with people with learning disabilities, and Scope, which supports disabled people and their families
I'd like to be remembered as ...
A decent man with a sense of humour