In a toughening of its stance on the RDR, Aifa director general Chris Cummings (pictured) says the FSA should be encouraging IFAs to meet higher professional standards with regulatory incentives rather than imposing an “arbitrary cliff edge”.
In an interview with this week’s Money Marketing, Cummings says advisers would want to increase qualifications if they were offered lower regulatory fees, lower capital requirements and less intrusive supervision. He says Aifa has no problem with new entrants having to reach QCF level four as long as regulatory incentives are offered.
He says: “The IFA sector has gone further than any other part of the industry in terms of improving professionalism. If there is a good commercial reason for advisers to get the qualification, then they will. What we have to avoid is an arbitrary date that leads to the closure of good firms.
“This approach is what the RDR was intended to do, that is increase consumer access to financial services. The current plans will lead to less people getting advice and that advice becoming more expensive.”
Cummings says the FSA must move away from its current “confrontational approach” when dealing with the investment market which, in itself, has been one of the biggest victims of the banking crisis. “We have already been punished once due to the failures of the banking system, to be punished again by introducing arbitrary supervision is deeply unfair,” he says.
Cummings says if the FSA does not listen on retrospective qualifications, Aifa will seek a judicial review of the RDR process. He says this would be a last resort as it would mean spending members’ money, as well as the FSA spending members’ money defending it.
Aifa is also looking at separate competition reviews to be brought to the Office of Fair Trading and European Commission on the FSA’s ability to abolish commission and its proposed ban on factoring.
“We think there is a strong challenge to their ban on provider factoring,” says Cummings.
SimplyBiz chairman Ken Davy says: “This is a very positive stance for Aifa to adopt. It recognises the whole of the IFA sector is on an unstoppable journey towards enhanced professionalism. Forcing an acceleration of this journey through an arbitrary deadline is simply the wrong way for the FSA to proceed.”
Institute of Financial Planning chief executive Nick Cann says: “We support the use of regulatory dividends but we do not believe that, under its current guise, the RDR should allow IFAs to continue without higher qualifications. Aifa’s membership needs to decide whether they want to become professional businesses offering independent advice or offer a more simplified service to their clients.”
Adviser Alliance director Alan Lakey says: “I fully support the robust stance that Aifa is taking on this issue.”
For full coverage of responses to the RDR consultation paper, see this week’s Money Marketing.