Could backbench pressure lead to an RDR rethink?
The timing of the Treasury select committee’s sudden keen interest in the Retail Distribution Review has not been very kind to Aifa.
Aifa director Rob Sinclair appeared before the TSC earlier this week, as part of the committee’s review of financial regulation. MPs used the session as an opportunity to highlight the large amount of correspondence they had received from IFAs concerned about the RDR.
It seems that many members of the TSC, particularly Conservative MPs, have a great deal of empathy for IFAs that are worried about the review and are concerned about the advice gap that would be created if a large number of IFAs leave the industry.
The mood of the session turned to one of frustration with the MPs concerned the anger they are hearing from IFA constituents was not being matched by the responses from Sinclair.
But, as Sinclair told the committee, the concerns the MPs put to him during the evidence session are the same ones Aifa has been smacking its head against a brick wall trying the convey to the FSA over the last four years.
It was a very strange role reversal to see MPs grilling Aifa about a perceived lack of support for IFAs who are worried about the threat of rising qualifications and the removal of commission. The last memorable appearance by the trade body before the TSC saw Paul Smee torn to shreds by committee members concerned about standards within the IFA community.
Throughout the various twists of the RDR, Aifa fought hard for a better deal for IFAs. The trade body felt betrayed by the FSA over its U-turn on a clear split between sales and advice and campaigned for the FSA to be more pragmatic about the introduction of higher professional qualifications. Judicial reviews were threatened and former Aifa director general Chris Cummings spent a great deal of time arguing his case in the trade press and at conferences around the country.
Aifa won concessions from the FSA, such as the introduction of alternative assessments, but on the central issue of IFAs being unable to trade if they do not get specific qualifications by January 2013, the FSA would not be budged.
During this lobbying campaign Aifa would have certainly appreciated strong support from the Treasury select committee but it did not seem very interested, despite a great deal of prodding from this newspaper. Perhaps the recent interest can be explained by the new make-up of the committee post-election and the fact the RDR is getting closer and therefore onto the political radar.
In any case, Aifa decided a major confrontation over qualifications was unlikely to succeed with a regulator that was not for turning. It took the view that if anything the political winds blowing in the aftermath of the economic crisis were going to give the RDR more momentum and it has focused a great deal of resources on helping members adjust to RDR through its well received business academy and launching its alternative assessment qualification.
So, against this back-drop Sinclair walks into the committee meeting to discuss the proposed restructure of regulation and is bombarded with RDR complaints.
Sinclair described the 2013 deadline as “unfortunate” but did not give the forthright views about the RDR that MPs were expecting. His response was more of a weary warrior explaining a past defeat in battle rather than the general preparing his troops for a fight that Andrew Tyrie and his committee were expecting.
It is worth remembering that the trade body continues to push hard for more pragmatism from the regulator over the “cliff edge” qualification requirements and continues to spend a great deal of time lobbying these same MPs about concerns around consumer access to advice.
Will this groundswell of MP support have any effect on the direction of the RDR? Conservative MP Harriet Baldwin’s Westminster Hall debate was supported by a decent number of MPs and Tory MP Mark Garnier is attempting to get a full debate in the House of Commons. You get the feeling it is an issue these MPs will continue to push.
Treasury financial secretary Mark Hoban was certainly forthright in his rejection of the arguments against the RDR his backbenchers were putting forward. But I have read and heard many passionate and articulate arguments in favour of higher qualifications and more transparent charging structures and Mark’s performance was not one of them.
The McDonald’s reference was unnecessarily antagonistic and some of the statistics he used to back up his arguments were shaky. Hoban spoke at length but did not do enough to address the specific concerns about older advisers that were the focus of most of the MPs’ concerns.
If this is an issue the Treasury select committee decides to take up and campaign on a certain amount of political pressure will be put on the FSA but it is unlikely to be enough to lead to a significant U-turn.
Behind the scenes, FSA staff are sympathetic to some of the arguments around consumer access to advice but the momentum is still firmly behind RDR implementation, as witnessed at today’s CII RDR conference.
However, if as we move much closer to RDR it becomes clear that a large number of IFAs will not meet the new requirements, you would expect more pragmatism from the policymakers.
The new regulatory framework needs to encourage more people to seek advice and take responsibility for their own financial affairs. The need for decent financial advice is only going to grow and the Government and regulators need to ensure there will be enough people around to deliver it.
Paul McMillan is editor of Money Marketing - Follow on twitter here.