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Olympic claim
It is the nature of things that those placed in charge seek to be seen to make a difference. Of course, a difference is not necessarily an improvement and it is also true that when governments and their appointed quangos decide to effect changes, these have a remarkably consistent habit of rebounding and creating an effect opposite to that envisioned.
The 1997 switch from Tessas and Peps to Isas is one such example. Another is the stakeholder pension innovation a retirement plan designed specifically for consumer engagement that has failed miserably due to the charges not allowing for marketing expenses.
The RDR is the current innovation and, like its predecessors, it is designed to fail. The reason why is best unravelled by the FSA’s Amanda Bowe in her September 2007 speech at the Financial Services Distribution Summit.
She said: “We do not believe it is our role to create markets, destroy markets or to define their structure. We have a statutory responsibility only to intervene in markets when the market itself is failing to function in a manner consistent with our objectives and where our intervention can deliver benefits that justify the costs that is after all the role of regulation.”
Few would consider the changes envisioned as retaining the market structure and, in terms of cost-effectiveness, £400m plus £40m a year is hardly cost-neutral.
The cost of the Olympics is now estimated to be 10 times that of the original budget, with £547m the latest estimate for the Stratford stadium, a figure which is not too distinct from that of the RDR. Let’s hope it does not prove to be a similar white elephant.
This question of proving competence shows how far from normality the FSA is roving with its compulsory QCF level four. We need to be more professional, we are told, we need to be like solicitors, surveyors, doctors. It is there-fore instructive to look at the professions to see how they deal with the upskilling of their members.
I recently contacted their various professional bodies and asked whether their members were made to sit additional exams or reach new levels of competence in order that they might be allowed to continue working.
Not one body insisted on such an uplift, although the majority do mandate some kind of continuing professional development, with the Notaries’ Society confirming that their members must undertake at least six hours CPD each year.
Proponents of the suggested regime may argue that advisers are starting from a lower level and must make greater strides. It comes down to interpretation and perception but really we must get away from the idea that all advisers work in complex areas we don’t.
One of the crazy things about all this is that the methodology already exists. It was invented by the FSA and is apparently alive and well and functioning sensibly. I refer to the system of permissions.
The FSA has decreed that some advice areas are more complex than others and require specialist exams. Examples are final-salary transfers and equity release.
I have not heard mention of misadvice or scandal in these areas, so one pre-supposes that the system is working as intended. If this is the case, then why can’t it be built upon to save the industry the grief, worry and Olympic-scale cost?
Alan Lakey is director of Adviser Alliance and partner at Highclere Financial Services
Readers' comments (3)
Anonymous | 8 Feb 2010 9:59 am
Alan
It is not only the cost. regretably the timescales imposed mean we are spending more and more time doing the compliance of our business and less time actually looking after our clients (the consumer as the FSA see them).
Our clients are therefore having to wait longer and therefore not receiving as an efficient service as they were a few years ago.
We ould like to expand our services to a wider raqnge of clients but we are being forced ever upward in terms of the financial wealth of clients we can afford to look after.
The aims behind TCF and RDR to improve the market are applaudable, but the effect is that more and more advisers are being driven from our industry leaving it exposed to the mass marketing of the Banks and large insurers who have the scale to implement this without affecting service standards, or was this always the aim.
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Anonymous | 8 Feb 2010 1:12 pm
Well said Alan. Most IFAs were already evolving their business models to provide ongoing professional service to clients before RDR came along. Apart from anything else it made complete commercial sense. The FSA are now just trying to take credit for this and the providers/professional bodies etc are riding the new bandwagon for their own reasons. Soon, a huge portion of the public will not have access to Independent Financial Advice. But by then of course, the regulator will have moved on.
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Anonymous | 8 Feb 2010 3:28 pm
A very poor analogy from Alan. It is simply not sensible to compare the GCSE level starting point of most IFAS with the degree + level of medical practitioners, solicitors etc.
The latter can quite clearly build their competence with CPD, for the former CPD is simply building on a foundation made of sand
Even those IFAs dealing with what Alan believes to be less complex areas of advice are below the level of competence the public deserves to expect.
We live in a highly technically complex financial world where even what appears to be the most basic of advice has an enormous knock on effect, the consumer deserves better and the sooner change resistors recognise that the better.
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