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Adviser bodies unite to demand urgent RMAR review

Smith: We need the FCA to let us know that all this information is being used

Adviser trade and professional bodies have united to demand the FCA carries out an urgent review of the retail mediation activities return as adviser anger grows over increasing regulatory costs.

Research from the Association of Professional Financial Advisers puts the total industry cost of meeting regulatory reporting requirements at over £10m a year.

Apfa senior technical adviser Linda Smith says an urgent review of the electronic reports, and the difficulties they are causing small firms, is needed.  

She says: “We have concerns there is a confusion over the terminology. We are also worried that too much information is required and we need the FCA to let us know that all this information is being used and if not then why is it all being requested.

“We have particular concerns about Section K but we are requesting an urgent review of the entire RMAR process and the pressure the current reporting is putting on smaller firms.”

Since 30 June, advisers have had to complete new sections K and L, which requires firms to send the FCA additional information on initial and ongoing advice charges, whether advice is independent or restricted, and how advice is paid for.

Personal Finance Society chief executive Keith Richards says PFS members have also expressed RMAR concerns.

He says: “We think there is an urgent review needed and with advisers still in a period of immense change we think the regulator would understand the concerns we have.”

IFA Centre managing director Gill Cardy says: “I would absolutely support any review which reduces the amount of work advisers have to put into completing these returns. I would also like to hear the regulator explain exactly why it thinks they are necessary and what information they gain from them.”

Plan Money director Peter Chadborn says: “The regulator has failed to articulate why it requires certain information, so it is not surprising the RMAR is being met with resistance. It just seems like extra work for little tangible benefit.”

An FCA spokesman says: ”To regulate effectively we need to collect data, not only to supervise individual firms but to ensure the whole market is functioning well. In a data strategy, to be published this week, we will lay out the FCA’s new approach to requesting information from firms to ensure we do so in a clear, consistent and cost-effective way.”

MM leader: FCA must review the impact and value of RMAR


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. Surely the FSA must have known about and should have taken action on, for example, the now failed Bentley Leek property investment schemes well before they started to come apart at the seams and plunge to earth in flames? If not, then what was it doing to monitor the situation? Or was it, as usual, just gathering so much data that it couldn’t identify amongst it all the areas on which it needed to act? Gathering ever greater mountains of data for its own sake does not lead to or even facilitate better regulatory outcomes ~ does it? How can the FSA not see this? Unless, of course, the real agenda against Financial Services Intermediaries (FSI’s), as most of us strongly suspect, is rather different from what they’d have us believe.

    Referring again to the Bentley Leek property schemes, more perhaps than any other asset class, property markets move in cycles of boom then bust. Property, as a suitably small proportion of an overall portfolio, can offer a justifiable measure of diversification but excessive concentration on any one asset class is highly risky and always has been.

    Doubtless the FSA will claim that its cursed and cack-handed GABRIEL returns are intended to enable it to identify and, one would hope, address such situations occurring in the future. But is this really likely to be achieved by burdening intermediary firms with the requirement to categorise, cross-categorise and account for every penny of their revenues, right down to the most trivial amounts of recurring income from old legacy products?

    Surely, a vastly simpler and clearer reporting system would enable the FSA to identify and then, where appropriate, investigate further areas of activity that look likely to throw up significant problems? Wouldn’t FSI’s be much more willing to engage in such a process instead of tearing out their hair trying to comply with the requirements of the current reporting system?

    Why, other than to justify its own existence, is the FSA so hell-bent on making everything so complicated, costly and burdensome for everyone? As ever, if there’s a straightforward, cost-effective and manageable way in which to tackle something and one that’s complicated, costly and, from almost everything we read, extremely difficult to comply with, the FSA can be relied upon to choose the latter. Why? What is it actually achieving apart from making life for FSI firms even more difficult than it already is?

    I recall Martin Wheatley having claimed that one of the objectives of the new FSA would be to make it easier for FSI firms to engage constructively with the regulator but, so far, the exact opposite seems to be happening.

    The statement above from an unidentified FSA spokesperson is just the usual generalised hogwash. All it says is that the regulator has decided it must have all this complicated, difficult and costly to collate data (which isn’t the same as actually needing it) but it offers no explanation as to why, in this particular format, or what it does with it. Are there any grounds for believing anything the regulator says?

  2. AIFA (APFA) had their chance and blew it in my view. Admittedly when they met with the FSA who were “consulting” on RDR Reporting Requirements they were told it was a done deal but stronger representations should have been made.
    One reason for the FCA being bloody minded is that they have a statutory obligation to capture the contribution from firms in the intermediation classes in respect of their role in the advice and sales process. But you cannot quantify that contribution.
    An example. We charge VAT for non intermediary services and are told to split the fee up for intermediary reporting purposes….. Invoices for advice have to be apportioned to an intermediary product area. How the hell do you do that?
    Tell you what – we will split Advice fees paid by cheque 80% into life and pensions, and 20% into investments. That will save us £15,000 in FSCS levy. Prove we are wrong FCA.
    The figures we provide are not only inaccurate they are meaningless without recognising that advice is not a product. The FCA should get their confounded data from product providers who surely know what business they are getting from the intermediary market.
    The data we, as a profession, provide is meaningless, inconsistent and enormously inaccurate. It is also motivated by shall we say less honourable motives.

  3. The comment from san Caunt is, in my view, accurate. All advisory firms, big or small are providing innacurate data to the FCA because that is all we can do.The FCA must know this so logic says a review is essential. Will it happen? I doubt it when the FCA appear so intransigent.

  4. As a firm we have always prepared management and financial accounts on a cash account basis. Our back office has always account for commission on a cash account basis.

    But as a concession to save time and trouble for firms the FCA “allowed” firms to account for adviser charge on an accruals basis – but they insisted that everyone do it!

    We only realised this when we came to complete our RMAR. So I phoned to explain that in back office because of RMAR our commission was accounted for on a cash basis but adviser charge was on accruals while in our financial accounts we account exclusively on a cash basis so the numbers were a nonsense – they said but that’s what we want. So we gave them a nonsense…

    This is why all adviser back office systems have had to start dealing with adviser charge invoices even when, as in c 95% + of cases the adviser charge is coming out of the product just like commission.

    This of course is why certain back office software suppliers have totally crashed their systems trying to deal with a generous concession that has costs £100’s of thousand even millions in development time all because the FCA was being generous –

    Out of touch – oh yes!!!

    Joke is when I wrote to an FCA head of dept to point this out he said they’d look at it. So if they do change their minds (and they ought to) another few million will have been completely wasted for precisely nothing.

  5. A useless form and process deserves useless information with slight errors and misinterpretations.
    if thousands of firms just best guessed each ambiguous section with their answers the FCA will need to make changes!

  6. FCA Spokesman !!!

    I need to justify my 100k a year salary thanks !! and by making you fill in reams of forms makes my desk look full, therefore keeps me in this job where I benefit from all the nice perks, and bonuses you lovely people from the financial services pay for !!!

    Why should I shoot the goose who lays golden eggs ?
    Plus it demonstrates to our government we are doing our job properly, so its not all pointless !!

  7. Oh dear. I was a member of the original team at AIFA that were asked to review and BETA test the thing before it went live. (Linda Smith was herself involved with this). As you may imagine we were completely ignored.

    Of course the information is probably inaccurate from a great many firms. But remember hardly a human brain looks at these returns anyway – far too much hard work if you are on £100k p.a.

    The old PIA system was practically fool proof. A copy of your PII cert, a copy of your last accounts and perhaps a copy of your last tax return. A bit on the type of business you transacted, any conflicts or influences – the whole thing took no more than 4 pages of A4.

    We now have this GABRIEL (I confess I don’t have too much trouble with it), but with all this information the Regulator can’t tell you how many IFAS there are, what the age bands are and what the overall turnover and profit margins are. If they can they are certainly not telling. I actually doubt if they can tell very much at all – after all that would entail analysing all that data in real time. Far too expensive, difficult and time consuming. And even if they did or could – what would they do with it?

  8. I am unsure if any of this information is pertinent to regulation of IFAs. The FCA really needs information from IFAs on the quality of their recommendations, Do they sell products such as UCIS, or others that could result in a total capital loss to the client. Where the FOS yesterday sent out information on complaints on investment recommendations, most of them seemed to be a mismatch between perceptions of risk. none seemed to include sales of toxic products.
    All the FCA need to insure is any advisory business, now not allowed to accept commissions, has adequate indemnity insurance in place and a reasonable advice process as well as qualified advisers.
    As we now have an income stream that is not product dependant, we are more in-line with accountants and lawyers because advisory fees, however paid, are the norm.
    Do lawyers and accountants have to return such a shedload of useless information? I doubt it.
    Does the financial stability of an advisory firm matter unless companies go broke to allow the FSCS to pay for misdeeds of the past? If those who use this get out really need it, they will, regardless of the capital adequacy requirements. The trick is to ensure there are no past toxic sales and are eliminated. Insurance should be able to deal with redress if a firm is unable to pay compensation demanded by the FOS. The amounts shown in yesterdays FOS report seem small when a complaint is upheld.
    Apart from this, a copy of the firms annual accounts, submitted in a set way on an approved spread sheet seem to me all that is really needed.
    More effort on hammering the cowboys, including the lawyers and accountants that aid and abet, will eventually cure this regulatory malaise.

  9. The time it wastes for everyone does seriously need to be considered and it is not just RMAR that this is a problem. The FCA requests data all over the place but I bet only a small percentage of it is actually reviewed in detail.

    On a side note though – please remember that the poor sods who do have to sift through this info are not on your 100k salary, many start on 20-30K (you’ll find that many of the FCA staff are not paid to the high levels you imagine)

  10. “To regulate effectively we need to collect data, not only to supervise individual firms but to ensure the whole market is functioning well.”


  11. Here is my understanding of how things should work which seems at odds with some of the comments made here:

    – Cash accounting basis is only available to sole traders and partnerships with a turnover <= £79K Therefore virtually all IFAs should be doing their accounts on an accruals basis anyway. - Adviser charges paid via providers may look like commissions but they aren't. They are payments for/towards one or more Fee Invoices (even if not currently raised). It is the Fee Invoice that matters for accounting purposes. Until that invoice is raised, VAT is irrelevant, turnover is irrelevant - that money is just client money. Once an invoice is raised, you just allocate that money (or client's Fee Cheques of course) to the appropriate invoice(s) until they balance. At the time you raise the invoice, you will have to categorize your fees to certain Income/VAT Accounts (all you would see is a Category name such as "Investment Life Transactional Fee"). Now if those Accounts were arranged to be the same as those required on the Gabriel report then your life just got a whole lot easier - you can fill in the relevant boxes by simply using the matching Income Account balances. And if your back-office system is smart enough, it should be able to create your Gabriel report in a mouse-click, just needing you to check and confirm before submission. That is as accurate as it gets and the FCA can have no complaints. If your back office system supports cash accounting but not accruals or only Commissions and not Fee Invoices and VAT then you need a new back office system fit for the post RDR-world. What systems are you using if they can't do all of this for you?

  12. I honestly don’t see what the problem is – if you have a good system to collect the MI and data it is not a major task. Our return took about one hour – not too much to ask is it?

  13. Peter R – e.g if you invoice a client where the recommendation is to do nothing, where in section K of the RMAR do you put this? VATable fees – where do they go? There is no product, only advice.No-one at the FCA appears to know – I have asked!
    I agree the rest of GABRIEL and RMAR is easy but I fail to see how some of it can be of any use unless the FCA know what our assumptions are. And of course it depends upon your business model – Wealth Managers will have no problem for example. (I would have thought…)

    p.s. that money is just client money – er Simon, do we hold client money? And the issue is how do you categorise your fee for advice?

  14. @ Sam – if you advise a client not to invest then that is surely investment advice in the same way that a switch is investment advice. Not increasing your pension payments is pension advice. VATable fees may be non-regulated income (taxation advice for example).

    Where do monthly retainers go? I would say they don’t relate to regulated products and enter them appropriately.

    I actually agree with Simon (12.25pm). The FCA do not require clients to be invoiced as such, but all fees must be accounted for correctly to HMRC. Suppose you agree with a client for 0.5% of the fund value to be paid to you and divided into monthly payments. Assuming you don’t want to get into CCL problems, that 0.5% becomes payable when? What if you take say twelve months worth and then fail to deliver the service or the client sacks you on day 360? Do you pay the money back or not? Is the client really paying you monthly, in which case your back office system should be able to cope and your GABRIEL figures will always be correct.

    It isn’t where the money comes from (after all, that will ALWAYS be the client) but rather what you do for the client and how the invoicing reflects that. It is there that the posting must be to the correct account and then the reporting will take care of itself.

  15. I don’t have a problem as such with the Gabriel report. However I do have one due, work for myself, by myself and am extremely busy meeting my clients needs. I am not going to be smart and say it is easy because – it isn’t. However it is a distraction which just now I do not need. Especially when I know my business meets the minimum capital requirements by a substantial multiple. Why do I need to prove it and waste time? The problem with current regulation is that there is not one individual requirement with which I would take serious issue but it is when you add it all up it becomes too onerous. Not that I am quitting. I will not be put off. I will survive!!!! It’s called being “Thrawn” (a Scottish term).

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