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Advisers don’t expect outcome to be different

Advisers are doubtful that the FSA’s switch from principles-based to outcomes-focused regulation will bring any significant change.

True Potential senior partner Daniel Harrison says it is “a little rich” for FSA chief executive Hector Sants to say at the Reuters Newsmakers’ conference last week that a principle-based approach does not work with individuals who have no principles. He says: “After all, this is the regulator who took two years to actually define what treating customers fairly meant – one of their flagship principle-based initiatives. If they cannot define such principles, who are they to accuse others of lacking them?

“A cynic would point at this change in regulatory stance and the proposed increase in FSA fees and point toward a further job-creation exercise going on in the FSA.”

Informed Choice joint managing director Martin Bamford believes that outcome-focused regulation is not likely to be overly different from the current regime.

He says: “I am not sure how different outcome-focused regulation will be from the combination of principles and rules. It will probably be a slightly more intensive approach to regulation.”

The Association of Independent Financial Advisers says it is concerned about how the FSA will apply its new powers of judgement on firms and what impact this will have on the IFA sector.

In his speech last week, Sants said the FSA will question the overall business strategy of institutions and make judgements on senior management decisions within firms.

Aifa director general Chris Cummings considers there is an inherent danger in the regulator being able to challenge business plans and being given the power to insist that certain models cannot cont- inue to operate.

He says: “Will these decisions boil down to an individual supervisor’s discretion and how will that affect IFA firms?”

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