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In the final analysis

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It’s the final countdown. Some of you will remember the 1980s’ hit by Europe, which, when I heard it on the radio last week reminded me that many of us will be counting down the days and months this year to December 31.

There has been a host of surveys and in-depth research, including the PFS’s own member survey, to try to establish how ready firms are and, in most areas, results are broadly the same.

The FSA published some commissioned research in December that showed the percentage of advisers with an appropriate qualification as at August 2011 was 50 per cent.

For PFS adviser members, CII exam records confirmed that 54 per cent were qualified as at September, increasing to 58 per cent by the end of December.

The majority of the rest are well on their way, with an estimated loss of advisers now expected to be less than 10 per cent.

Progress with qualifications is relatively easy to track but business readiness is more difficult. On a positive note, our survey, conducted in October last year, shows PFS members are more confident in meeting the retail distribution review requirements than in the previous year.

There was a notable drop in the percentage that claim to be finding the transition to adviser charging difficult, from 39 per cent in 2010 to 30 per cent in 2011.

The percentage that stated achieving the qualifications and meeting capital and regulatory costs would be difficult also fell to 27 per cent and 25 per cent respectively and slightly surprising was that, at 32 per cent, “recruiting or replacing advisers” still had the highest score in the difficult or very difficult box, despite a significant decrease from the previous year.

The progress that firms have made is commendable but many will need more to complete the task. With just 11 months to go, there are numerous unanswered questions that have the potential to have an impact on running an advisory business and, in particular, on its operations. More specifically, still outstanding from the FSA are the final rules relating to platforms and rebates, final rules on legacy commission and further guidance on the applicability of the rules relating to independence.

In addition, members are calling for final guidance from HM Revenue & Customs on VAT and adviser-charging. None of the above should delay firms in establishing a service proposition and remuneration structure but they will need to ensure they have the right systems, controls and processes in place to support their businesses, which may not be possible until the necessary guidance is available.

Let’s hope the wait is not much longer.

Fay Goddard is the chief executive of the Personal Finance Society

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Readers' comments (1)

  • "an estimated loss of advisers now expected to be less than 10 per cent"? I've read elsewhere that by the end of last year already 13% of the adviser population had quit (the upper limit of the FSA's own finger in the wind estimate, as quoted to the TSC by Hector Sants last March). Have, since then, adviser numbers rebounded by 3%, with no more losses now expected? I don't quite think so. It's hard enough persuading most people to pay realistic fees for advice from demonstrably experienced and knowledgeable practitioners. That challenge, I suggest, is likely to be very much harder for a young freshman with a sharp suit, a shiny briefcase and shoes and a few letters after his name proving that he's passed the relevant exams.

    And anyway, given the TSC's concerns over the scope and timetable for the introduction of the RDR, how come it's raised no challenge to the FSA's criminally understated estimate as to what it's all going to cost (originally £600m yet now nudging past the £2Bn mark)? I'm beginning to think that Andrew Tyrie is rather more mouth than trousers.

    Still, even if the TSC were to try to hold the FSA to account, in the final analysis it has no powers, no powers at all. It's a rigged deck and the FSA holds all the cards, with an official endorsement from the government to boot. Unless or until the government formally retracts its statement that the FCA, like the FSA before it, will be accountable only to its own board, nothing will or even can change. Why does Andrew Tyrie even try to pretend otherwise?

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