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RDR “waivers” and will a compromise be reached?

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Behind closed doors I’m sure the FSA readily admits that, whatever its intentions, it made a spectacular PR own goal in embargoing a comment rejecting the Treasury select committee’s key recommendation so that it could be published alongside the TSC report.

From a PR perspective the regulator was attempting to kill the story - it was hoping that all the media coverage would lead with the FSA’s rejection of  the call for a delay rather than the call for a delay itself.

Instead, the FSA has enraged MPs who feel they have suffered from the same kind of antics that many IFAs complained about in their evidence to the committee.

The swift rejection gives the impression of a regulator unwilling to take onboard the balanced proposals of the backbench committee. This is not the same McFall-led TSC which too often failed to hold the previous Government and the FSA to account and only late in the day showed any real teeth.

Since the general election and the MPs’ expenses scandal the mood on the backbenches across all the parties has changed. Andrew Tyrie is already proving a worthy chair of this powerful committee and many of its members, especially the 2010 intake, are far more likely to question authority than their predecessors. 

The strength of the MPs’ feelings over the FSA rejection was made clear in the angry comments on the front page of last week’s Money Marketing and then in a letter from TSC chairman Andrew Tyrie to FSA chief executive Hector Sants expressing his dissatisfaction with the FSA’s behaviour.

In his letter Sants said the FSA would soon be publishing guidelines for eligibility for waivers from the RDR as well as looking at whether “further mitigating actions” were required to support advisers who are doing their best to reach the new requirements.

Whether this is the start of a loosening of the FSA’s dogmatic stance on the RDR or simply Sants paying lip service to the committee we do not yet know. 

The FSA  says any RDR “waivers” would be on a case-by-case basis with advisers having to submit a thorough case for why they should be allowed an extension, rather than a general waiver for a certain demographic.

Observing the FSA’s quick-fire rejection of the TSC’s key RDR recommendation, Cicero Consulting director Iain Anderson described the  manoeuvre as a “robust starting point” for  negotiations between the regulator and the FSA.

The letter exchange between Tyrie and Sants has certainly moved on these negotiations  but there could be some more horse-trading to come as MPs and the regulator attempt to create a consensual view. (Don’t be surprised if Sants is hauled in front of the TSC again in the Autumn to explain the FSA’s full response to the TSC’s report).

So, is there an RDR compromise that would be acceptable for both sides?

A few years ago the Personal Finance Society floated the idea of allowing older advisers to remain in the industry for a set period after the RDR is introduced, with a sunset clause agreement meaning they would then leave the industry after this date. Under such agreement the advisers could expect heavier regulatory scrutiny and perhaps increased supervision from their network or other advisers at the firm. The idea fell by the way side but it would be interesting to hear advisers’ views on whether such a plan should be revisited.

Adviser feedback and our online straw poll show the industry is split on whether a one year delay should be introduced with a significant minority of advisers unhappy about other firms benefiting from the extension when they have gone to the trouble of getting the required qualifications within the original timeframe. The FSA warns a one-year delay will lead to momentum being lost.

If the FSA was to introduce specific regulatory dividends, such as lower fees for advisers who reach the 2013 deadline, alongside a one year extension, would more people support the delay and would this allay the FSA’s momentum fears?

After last week’s fireworks it is probably time to focus on finding common ground. Let’s hope the FSA does indeed take time to consider the MPs’ report in full and is prepared to look at “mitigating actions” to help with the RDR’s transitional arrangements to give the reforms the best chance of being a long-term success for advisers and their clients.  

Paul McMillan is the editor of Money Marketing- follow him on twitter here

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Readers' comments (27)

  • The idea of a 'RDR surcharge' for those who fail to mee the RDR requirements doesn't seem to be a bad idea.

    It could even be tiered so over time, the surcharge goes up.

    It would need to be high enough, so advisers would want to becme fully RDR compliant (or retire) - starting at say £500 per month would allow the FSA and Compliance Professionals to document the individuals competency on a regular basis. After 6 months - it could go up to £750 pm and so on.

    A lower fee would not allow the higher level of monitoing required and for some advisers - might be felt to be a low cost solution!

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  • Surely the Personal Finance Society idea of allowing older advisers to remain in the industry for a set period after the RDR is introduced, would require their advice to be supervised and signed-off by an RDR qualified adviser. Otherwise the public could perceive their advice to be of a lower standard. This would increase costs to a level that is unlikely to be affordable, except by firms that have completed the transition to the Post RDR world, and as such are unlikely to want part qualified advisers.

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  • The issue really is quite simple, do we have government by quango or by elected MPs. All the TSC is asking for is 12 months and even that is beyond the capacity of the unelected dictators! Perhaps now the true regulatory colours are being seen by elected MPs they will have a far better understanding about what it is like to be regulated by these people. The FSMA 2000 must go along with a total rethink of FSA powers. The Financial Services Authority (FSA) is a quasi-judicial body that has failed in every one of its four statutory powers:

    If you need to know what needs to be done ask Hectors Sants: The FSA is not accountable to Treasury Ministers or to Parliament, as confirmed by Hector Sants at a Treasury Select Committee meeting on 9 March 2011. Sants told TSC Chair, Andrew Tyrie, that Parliament needed to legislate to remove the FSA's non-accountable status.

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  • @Paul Howard.
    Yes Paul, I agree with you to some extent. However, is this not just then bowing to those who haven't qualified and laughing in the face of us who have spent hours at weekends studying to comply with a set of rules that has been in the mixer for some time now.

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  • This will probably sound harsh to many but there has been plenty of time for advisers to take and pass level 4 exams. If they've chosen not to do so, that's up to them, but those who have should not see their efforts diminished by a last-minute watering down. For many, there has been a clear opportunity cost in achieving a higher level of qualification and those that have incurred it deserve to reap the rewards compared to those that have not.

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  • RDR Waivers will be like FOS appeals or even like
    Personal hearings -- permitted but NEVER allowed.

    They will be no more than an illusion created to silence the Select Committee. A case by case basis means that you will have to jump through flaming hoops with your eyes closed and your pockets open just to get to the point that you can be turned down. in no time at all no-one will apply because it will become rapidly apparent that there is no hope of success.

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  • Nope, Sants and the Quangocrats ( a new thrash metal band apparently) won't go for it. The fact is that the whole FSA is redundant, so the RDR must also be. The purpose of the RDR debate is drag us into trench warfare debating the minutia of the FSA pointless rules and regulations, when we need to be taking them on about their whole existence. Pretty well everything the FSA does would be better donbe by someone else, whether that is the Bank of England as a state organ or the CII as a private regulator concerned with making sure that its members behaved.

    The RDR is simply the final piece in the 'nationalisation by regulation' of financial services. It is central planning and it will fail. Oh yes, sorry, I was forgetting. The FSA has already failed.

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  • Paul Howard
    £500/m to stop you having your living STOLEN from you? You're 'aving a larf arn't you.
    How far away from the real world are you dwelliing?

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  • For or against a delay, the previous comments display an element of self interest which misses the point of delaying the start of RDR. The FSA isn't ready for it yet as all the building blocks are not remotely in place. Europe is yet to announce their ideas for a pan european RDR which is likely to impose a layer of regulation on the market which could conflict with the FSA's regulation. Just as likely, it will not. However, we don't know and that is the point. The FSA's argument that to delay is to increase the chance of consumer detriment has not been backed up with any evidence that I am aware of.
    Most important, is that a delay will give the consumer the opportunity to comment on how they pay for advice in the future and whether they like the idea of choice being removed from them or not. They haven't been told yet and it is about time they were.

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  • I may retire January 2012
    I prefer to retire February 2015
    I have 25 years experience and my clients take up all of my time with the exception of weekends when my grandchildren do.
    I have never had any complaints, and have to prove compitence through CPD (member of a Network) in all the areas of advice.
    Exams prove a level of education which is needed for new entrants into a profession, not those who have proved it over time. This is why other proffessions have grandfathering (i know this has gone) I think its time you all stopped Quarrelling amongst yourselves and got on with trying to sort out your industry.
    Remember we are all guilty until we prove our Innocence. This is agaist your human rights. The FSA is not answerable to the Government or the Judiciary. This is why they treat usthe way they do.

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