Political pressure can certainly still influence RDR
Share
Monday night’s Parliamentary RDR debate was an extraordinary affair.
To see around 80 MPs hang around late into a cold November night to listen or contribute to the debate, with no Party whipping or vote, put paid to those who have been suggesting political concerns about the RDR where emanating from a tiny number of renegade backbenchers.
Throughout the 30 or so contributions to the debate there was a near universal consensus from across the political spectrum about the dangers of certain aspects of the review.
Of course some of the contributions were a little light on knowledge- details on the new charging structures were sometimes muddled, some of the claims a little outlandish and a few MPs appeared to be simply reading off a script they had never seen before.
But there were also a number of impressive contributions - I would highlight Labour’s Michael McCann, Tory MP Sharon Wheeler and Labour Shadow Treasury minister Christopher Leslie alongside some of the usual suspects.
Leslie’s contribution was particularly significant suggesting a change in tack from the Labour Party which has showed little interest in the RDR over the last few years. Of course, some may speculate this Damascan conversion is more to do with political opportunism than a genuine worry about consumer access to advice.
But I did not get that impression from listening to Leslie’s speech. He agreed with the need to move to a more transparent charging structure and also higher qualifications for new entrants. But he also suggested that what he described as Labour’s “pro-consumerism” be extended to concern about the effect of a significant number of IFAs leaving the market and showed support for some kind of grandfathering solution.
Leslie suggested possible amendments to the upcoming parliamentary bill around the restructure of financial services regulation, even if they simply act as a symbolic gesture of MPs’ concern. This could leave some vocal Conservative backbenchers in an awkward position of having to decide whether to vote against the Government.
The RDR has snowballed as a political issue since Conservative MP Mark Garnier first gave an interview to Money Marketing in October. Many people were far too quick to dismiss the concerns of backbenchers, particularly underestimating the hunger of the new intake of MPs to act independently of their party and, especially since the expenses scandal, show they are doing a useful job in representing their constituents.
It is very easy for lobbyists, company spokespeople, trade bodies, media IFAs and journalists to get caught up in our own little bubble. Many people you are speaking to have been enveloped in a cosy consensus around the need for reform at all costs. The agenda behind this can stretch from a passionate belief in the need for reform for the right reasons to deeply self-interested motives and also includes many who are simply bored of talking, lobbying or writing about something that has been going on for a few years and now just want the FSA to get on with it.
MPs do not have the luxury of living in such a bubble and neither do many of their IFA constituents who are either concerned about reaching the new requirements themselves or concerned about the dangers to society of a significant number of IFAs leaving the industry.
Hundreds of IFAs have lobbied their MPs to express their concerns about the RDR. Of course MPs getting lobbied about every issue under the sun but the plight of IFAs has hit a certain nerve.
In many cases the IFAs that have been raising concerns about the RDR to their local MPs are important pillars of their community and may be personally known to the MP. They are far from political agitators and rarely complain without good reason. Therefore, when they raise concerns, MPs sit up and listen.
The momentum has also been helped by many advisers who already have the required qualifications and business models also lobbying their MPs to share their worries on the RDR.
It is nonsense to suggest that such a groundswell of political concern has no chance of influencing proceedings.
It would be folly for IFAs to down their examination books and business transformation blueprints and think the RDR will go away. It will not.
As Mark Garnier said in his address to Parliament, the agenda of MPs is not to derail the RDR or turn the clock back on the move to greater professionalism and charging transparency.
But an important consensus seems to be developing around the need to ensure as much as possible can be done to stop a large number of IFAs leaving the industry.
Senior management at the FSA will have been taking careful note of the growing political interest in RDR. I would suggest the issue of consumer access to advice is something that is also troubling many within the regulator, especially as any plans for simplified advice seem to have evaporated.
The powerful Treasury select committee is also likely to apply pressure through its consultation on the RDR. A number of committee members from across the benches raised their RDR concerns during the debate, with chairman Andrew Tyrie listening carefully and raising personal concerns about consumer costs rising.
In responding to MPs, Hoban’s speech was far less antagonistic than the one he gave at the recent Westminster Hall debate. Whilst suggesting it was right the FSA “gets on with its job” he also said it should listen to the issues raised. His message was far stronger when talking about the remuneration reforms and overall increases in professionalism than on grandfathering and the plight of existing advisers worried about the deadlines.
Heavy pressure from Parliament is almost certainly not going to make the RDR disappear. But it is quite possible a growing political consensus helps guide the regulator to look again at the current cliff edge deadlines and introduce a greater degree of pragmatism to its policies to ensure the interests of consumers are definitely being served.
Paul McMillan is editor of Money Marketing - follow him on twitter here
If you enjoyed this article, sign up here to receive daily email updates from Money Marketing and Follow @_moneymarketing
View results 10 per page | 20 per page | 50 per page
Readers' comments (25)
Simon Mansell | 1 Dec 2010 3:43 pm
MM has bee very helpful and supportive of the IFA cause and I wanted to reprint an Open Letter that I have just posted to Andrew Strange of AIFA. It seem it would serve as a useful historical reminder of where this all started, before we all get knocked down in the rush for those laying credit to what can only be seen a a significant move forward.
OPEN LETTER TO ANDREW STRANGE DIRECTOR OF POLICY AT AIFA
“AIFA is extremely supportive of this debate and grateful to Mark Garnier and Harriett Baldwin for securing it.
I welcome the AIFA “U turn” but would just like to point out to you Andrew that your predecessor Chris Cummings did not share your enthusiasm for the debate and the original efforts started by a small movement of grass root IFAs exasperated at the lack luster approach of AIFA. I would further remind you of the negative reaction of AIFA when the original meeting took place and was reported in the press.
AIFA RESPONSE:
The original meetings that led to this debate were the result of "crude IFA lobbying",
according to Chris Cummings of AIFA and this was damaging the IFA cause.
It is this very same "crude IFA lobbying" that is starting to rock the RDR boat! I seem to recall that it was only after a number of AIFA resignations that Chris was forced to retract his original comments.
THE FACTS:
In September 2009 Astley-based IFA Mike Jeacock hosted a meeting of local independent financial advisors (IFAs), whose livelihoods were threatened by proposed Financial Services Authority (FSA) measures. The meeting was called so that Harriett Baldwin, Mark Garnier and Robin Walker could meet with, and listen to, the concerns of local IFAs. This meeting was driven forward by groups of IFA exasperated at the lack luster approach of AIFA, many feeling that AIFA had sold out to the regulator! I was privileged to chair this meeting. Julian Stevens & Neil Liversidge spoke with passion. Many others (too numerous to mention here) contributed, as indeed have many hundreds if not thousands of IFA’s up and down the length and breadth of the UK who have been contacting their MPs. The truth is Andrew that these MPs were so astonished at the treatment of IFAs, so much so that they went on to a full Parliamentary debate. Hundreds of IFA up and down the land have abandoned hope of robust representation by the likes of AIFA and have taken matters into their own hands to save their livelihoods.
Many if not most of these would have no future if they accepted the AIFA stance on grandfathering and allowed you to represent their interests!
I welcome the AIFA U turn providing it is not a continuance loop! But before I can relax in the knowledge that AIFA is not a spinning top of varying pro and negative RDR views you will need to represent all IFAs and include the many whose average age should be recognised and protected via grandfathering, the same protection that AIFA have rejected.
Regards
SIMON MANSELL
TEMPLE BAR IFA LTD
Unsuitable or offensive? Report this comment
Bob Donaldson | 1 Dec 2010 3:49 pm
I agree with your comments and Ms Wheeler hit the nail on the head when speaking.
I think the greatest outcome from the debate might be much more scrutiny of simply handing over the reigns to the FSA to get on with it. I trust that the Treasury Select Committe will intervene in some way to stop the FSA simply railroading through matters and ignoring the concerns of IFAs and now more importantly some MPs.
Unsuitable or offensive? Report this comment
Tom IFA | 1 Dec 2010 3:49 pm
Paul you ar equite correct the numbers attending the debate were indeed impressive and their knowledge in fairness very good.
The one who read verbatum from a prepared written speach was the Treasury Minister and FSA 'bessie' Mark Hoban. He read this out for a full 7 minutes not prepared to give way nor did he once refer to any of the points made by his colleagues and from across the floor.
There is still much lobbying to do to ensure that our MPs really have the facts and to push them as hard as possible for practical sense to prevail.
Unsuitable or offensive? Report this comment
Iain | 1 Dec 2010 3:51 pm
I think that Paul has sumed up the situation spot on.
All those wasted years with AIFA warning us not to talk to our MPs directly & leave it all to them to sort out.Thank god I saw through them never joined or paid them a penny .
Hoban's claimed at the beginning of his pro FSA diatrade that he had spoken earlier that day to the FSA. Judging by the clap trap he came out with, it is fairly obvious who wrote the speech for him.
Unsuitable or offensive? Report this comment
Michael Wainwright | 1 Dec 2010 3:52 pm
Let us hope that you are right Paul. It was particularly interesting to hear the views of IFAs who are already qulalified yet have concerns, and also about a number of probably unintended consequences that I had not thought of before. So many of the pro RDRs seem to just comment on their own brilliance in having taken the higher qualifications. At 63 I would certainly not want to use up time during which I could be looking after clients by studying for exams, part of which do not have much relationship to my day to day work. But fortuneately I am just a Compliance Consultant, concerned for our industry, who sees highly qualified advisers making just as much of a muck of providing advice, and breaking FSA rules, as some of their less qualified bretheren.
Unsuitable or offensive? Report this comment
Tom Scott | 1 Dec 2010 3:57 pm
It's time to keep up the pressure, whether you agree with RDR or not. This is a current issue and my experience is that MP's are prepared to listen. IFA's are now enjoying the debate and consultation that the FSA deprived us of at the outset.
It's such a shame that so much money has been spent before anyone thought to ask us, the people who have to put this into practice.
It's even more shameful that the FSA chose to take this confrontational, cliff-edge approach rather than imposing the rules for new people or those with poor disciplinary record while incentivising existing advisers. If fee charging, highly qualified advisers with high capital adequacy are as good as the FSA believes them to be then they should require less supervision and hence lower fees.
Had the FSA adopted this strategy I suspect that most advisers would have adapted by now.
Unsuitable or offensive? Report this comment
Danny Lovey | 1 Dec 2010 3:57 pm
Well summed up Paul, the groundswell of opinion of back bench MP's was pretty universal and the grandfathering issue I believe will have to happen as MP's were outraged at the Hector Sants comments to the Select Committee that a 20 per cent reduction in the number of IFA's was an 'acceptable' number as a result of the RDR. Of course that is not the only issue of contention and the charging and no commission issue is still likely to do a lot of damage to not only the IFA industry but the fact that the lower income groups will simply not be able or preapared to pay for advice, as will others who could afford it but just will not wish to pay for advice.
Unsuitable or offensive? Report this comment
Blair Cann | 1 Dec 2010 4:01 pm
For what it is worth I share the Editor's view that the groundswell of opinion is now such that it cannot be ignored and that it will lead to some significant changes to the RDR that eventually is implemented. However those of us wo are in touch with our MPs must maintain that contact.
It does seem that a large number of people, MPs, IFAs, Journalists are in agreement over the necessity and the likelihood of change to the RDR. There does however appear to be one particular journalist who still does not share the consensus and whose views as far as I can judge remain rigid. His name escapes me.
Unsuitable or offensive? Report this comment
Anonymous | 1 Dec 2010 4:13 pm
"The truth is Andrew that these MPs were so astonished at the treatment of IFAs, so much so that they went on to a full Parliamentary debate"
I think this came out in the debate. Some of the MPs could not believe that the FSA had so much power.
I do not want to sound dramatic but my own belief is that the fsa has waged a reign of terror- (be afraid be very afraid), over the ifa community for too long. If any other organisation had treated any other section of society as the fsa have treated IFAs over the last 10 years the MPs might have been calling for criminal proceedings.
So well done Simon and all the other guys who arranged that first meeting to highlight the situation.
I too have written to my MP but I think he must be related to Mark Hoban.
Unsuitable or offensive? Report this comment
Anonymous | 1 Dec 2010 5:00 pm
My own views on the RDR have been pretty much consistent all along, insomuch as I am prepared to support the FSA’s view that commission in general should be abolished, and that we should become a fee charging profession.
However the silly and short sighted requirement that existing and competent advisors should be required to sit and pass exams within a 2 year time period is becoming unworkable, listening to the parliamentary debate on Monday evening reinforced that view. At the very least extend the time frame out to around 4 to 5 years from now, this being the average length of time it takes to obtain a degree. And as other MPs have commented, it should not be beyond the wit or scope of the FSA to offer a non-exam CPD Grandfathering alternative; the administrative systems are already in place to enable that. Do all this and 90% of the heat around this issue would go away.
Finally, listening to the Parliamentary debate, I was genuinely moved by the plight of some Home Service folks working for Friendly Societies, together with their customers. These advisors although tied offer simple straightforward death and savings policies costing between £1 to £5 per week, presumably collected in cash from their clients each week. Their clients may not have the wealth or sophistication to afford or comprehend more complex products, but nevertheless demonstrate commitment to try to be self-reliant. My own career started 30 odd years ago as an agent with the Pearl Assurance in the Home Service industry so I have an understanding of such businesses. Telephone based help lines will never ever replace this service if lost. Why the FSA should seek to put such people out of business, destroying hundreds of years of history is beyond rational belief and without human compassion.
Unsuitable or offensive? Report this comment