Aifa makes the right choice on restricted advice
“I am not prepared to allow things to go on as if business is as usual because it is not as usual”. So declared Aifa chairman Lord Deben in an interview with Money Marketing earlier this year.
And so it has transpired with Aifa’s announcement last week that it will redefine its membership criteria to include certain restricted advisers in anticipation of the retail distribution review reforms.
“Pragmatism, not idealism” was the line pushed out by many associated with Aifa in defending the trade body’s move, although director general Stephen Gay was quite right to set out a more positive tone in explaining the restructure.
If the rebranded trade body is to be successful it must be proud to represent the full constituency of its membership and not treat one section like an embarrassing little brother it has to tolerate in order to pay the bills.
If it is to be taken seriously in Parliament, Threadneedle Street, Canary Wharf and Europe it must present a strong and united front in pushing the message that decent financial advice is a hugely valuable commodity which plays a positive role in society. Any suggestion of bickering or rivalry between the “independent” and “restricted” colleges will see the trade body laughed out of town.
Driving a wedge between the advice community through a failure to reform would have weakened the voice of the trade body and played into the hands of the banks and insurers with their large PR and lobbying resources whose interests are not always aligned, and sometimes directly opposed, to the adviser cause.
Strong representation of the UK’s unique advice landscape at a European level is only going to get more important as national regulators become the supervisory arms of a European regulatory regime. This requires significant resource and, as Aifa is already struggling with funding, a further cut would harm the interests of all advisers.
Gay last week made the moral case for continuing to represent advisers whose definition will change due to the FSA “moving the goalposts” as part of its RDR rules. In such instances advisers will still have to attain QCF Level four qualifications and ensure their remuneration is agreed with the client and without provider interference. Due to the new definitions of independence, some firms may calculate that they can offer the majority of their clients a more cost-effective service through a restricted route.
Would it be correct for Aifa to abandon these advisers and suggest they no longer need to be represented? Whether this ends up being a large or small number I think the answer is no.
The dilution of the independent-only message is obviously a concern but a dilution of the trade body’s ability to claim to be the voice of all professional and unbiased advisers would also be a worry.
The new trade body will comprise three colleges for mortgage brokers, IFAs and restricted advisers. As the market segments further due to the RDR it is important the needs of the diverse adviser marketplace are catered for.
But looking at the big issues facing the industry that you would expect a trade body to represent you on, and prove its membership fee, Aifa’s new expanded membership should be on the same side.
In fighting the intermediary corner over European credit directive and the repercussions for mortgage advice, in looking to influence Europe, the Treasury and FSA over compensation scheme funding reform, in continuing press the case that advisers are paying too high a share of regulatory costs compared to their risk and in looking to influence the upcoming Prips directive interests are aligned.
As such, a united adviser lobby, focused on promoting the value of professional advice untainted by provider influence and ensuring the best interests of their clients are being served, is far more likely to succeed in influencing the agenda than a number of fragmented groups.
Paul McMillan is editor of Money Marketing- follow him on twitter here