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Aifa: Hopes and fears for 2012

As another year starts, we are that bit closer to the implementation of the retail distribution review. At least that is what we are all led to believe.

I am struck by the number of loose ends that still need to be tied up. At Aifa we continue to work hard, pressing for the urgent clarity that is needed on a number of RDR issues. There remains the potential for unintended consequences and we will press to find fair and workable solutions that advisers have sufficient time to imp-lement. A smooth transition will be a key measure of the RDR’s success, not just for the industry but for customers too.

There are issues related to the RDR that are too important to be fudged. They need to be resolved – and resolved quickly. We must have more clarity on how some aspects of post-RDR advice might affect trail commission. We have to know how Mifid will play out – and whether it will work against RDR provisions and whether the UK will be afforded exemptions.

We also have to understand more about the appli- cation of RDR rules to platforms. It is unsurprising that such a respected body as the Treasury select committee has questioned the FSA’s readiness.

The delays on capital adequacy and platforms suggest a dissipation of the impact of the RDR meteor but there is still much damage that can be done by poor implementation.

The development of the new regulatory architecture remains in train and following up on our appearance before the joint committee on the Financial Services Bill, we will continue to press for an approach that is more accountable, responsive and cost-effective.

The role of the regulator must be to ensure markets are effective and efficient. It would be remiss, however, if the new regulator did not also have a duty to take other factors into account, such as improving access to advice and closing the savings gap.

The coming year will see the beginning of other important developments – a consultation on FSA fees, reviews of the funding models of the likes of the Financial Services Compensation Scheme and the Financial Ombudsman Service and the introduction of automatic enrolment into employers’ workplace pension schemes. There will be plenty to keep us busy.

I look forward to the new year with hope and a determination to continue our mission of pressing the Government and the regulator to deliver an improved environment for the provision of that incredibly valuable proposition – professional financial advice.

Stephen Gay is director general of Aifa


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There are 10 comments at the moment, we would love to hear your opinion too.

  1. I do hope your hopes are not dashed to early Stephen, but dashed they will be. The RDR train is steam rolling away and the FSA will implement it as per their deadline regardless of whether or not these issued have been resolved. Its going to be Hector’s legacy and nothing will stop him from ploughing ahead with this catastrophic event. Using a nuclear missile to crack a walnut is what the FSA do best and oh boy are they on the ball with this mission!!!!!!!!!!

  2. Incompetent Regulators Award Team 9th January 2012 at 10:47 am

    I recommend Mr Gay should start looking for a new job immediately.

    AIFA is dead. Long live the world class regulators!

  3. Stephen, thanks for another insightful piece. Like Marty, I would like to think that your hopes (shared by many) will not be dashed. However, I see no reason to believe that the FCA will take a better attitude to the savings gap issue than the FSA (it’s not within our remit) has done in the past.
    You are absolutely right that there is much that is outstanding in the RDR still – despite the years that this juggernaut (hardly a meteor at this speed) has been rolling for. But the fact that everyone outside Canary Wharf can see the problems this causes and the impossibility of building sustainable businesses without knowing all the answers means nothing unless the FSA/FCA also acknowledges the problem.
    Hope is a great and wonderful thing – but it does need to be based on reality.

  4. I am 64 and have just reached diploma status But I am really beginning to wonder if it was worth all my effort last year to qualify

    Every day the landscape post RDR changes and looks so challenging it isn’t true and if I was a youngster looking for a carreer the last place i would look is financial services

    What I fear isthat it will be very different with only the top 1% of people out there taking advice

    What will our industry look like in 5 10 20 years ?

    I will probably choose to retire and leave it to all you younfg people to enjoy

    so the challemnge of passing an exam ot two wasn’t probably worth it after all

  5. Over Christmas I thought carefully about what I wanted from life and decided that working in an industry where the clueless regulator acts like a fascist dictatorship was no longer part of my future.

    So, I’ll be closing my business, making 4 advisers and 3 support staff redundant and leaving my lovely clients to the mercy of the banks.

    I’ve had level 4 for some time and my business is 85% RDR compliant. Meeting the standards would be easy(ish) BUT I CAN NO LONGER SEE WHY I WOULD WANT TO.

    If you’re staying in after December ask yourself this question. How many more stupid hoops am I prepared to jump through – because, believe me, RDR is just the start.

    The FSA hate you and want you out of business.

  6. Stephen,
    I commented on your last article you wrote here and supported you. I also asked you about factoring and whether or not you were going to lobby FSA on ths issue, you didnt give me an answer.There are a lot of small IFAs out there who rely on small regular premium savings plans, ISAs and pensions and are going to have a tough old time and are extreamly worried. What are your feelings on ths area.

  7. Probably the biggest loose end of the RDR is what it’s going to cost the industry to implement. The FSA’s initial cost estimate was £600m. That’s now become £1.7Bn. If we add to that the costs to providers of altering their systems to eradicate commission on top-ups to legacy products, the total cost is likely to exceed £2Bn, which is nearly 3½ times the original estimate. The eventual figure may well go higher still.

    No one seems to be challenging the FSA on this endlesly spiralling cost-of-implementation figure or, if they are, their challenges are falling on deaf and unaccountable ears.

    Of what value is any Cost:Benefit Analysis if the starting figure is wildly understated and if the FSA is not forced to rethink the entire proposed initiative in the face of the anticipated cost of its implementation going up and up and up, ad infinitum? None. It’s just a sham, in much the same way as are the FSA’s token consultation exercises.

    The core problem is lack of accountability and nothing will change until the FSA is made accountable to an All-Party Independent Regulatory Oversight Committee with the absolute power to say to the FSA: This is wrong and you aren’t going to do it.

    Hector Sants et al have a pretty good idea that this will never come to pass, not least because the government has already stated that the FCA, like the FSA before it, will be accountable only to its own board which, of course, means accountable to nobody.

  8. @Tricia Yates

    Spot on Tricia

  9. Like Stephen I have my own hopes and fears.

    My first hope is that the appointment of Chris Hannant as AIFA Policy Director does not signal an even greater move towards the ABI policies on the RDR. Which you will recall effectively acted as a template for the first RDR draft.

    My second hope is that some miracle occurs – an epiphany at E14 where clarity overrides previous obduracy and they see the futility and utter waste of the RDR experiment.

    My fears are accumulating far quicker. I fear that the RDR will prove to be as effective a culling as the Eskimo seal hunts. I fear that the costs and levies passed onto advisers will increase exponentially as we move towards a world where every problem creates a complaint with costs and compo.

    I fear that the FCA will be a more ferocious and equally unaccountable beast which will look to bare its teeth at the earliest opportunity.

    I fear that the public image of IFAs will crumble as myriad forms of advice spurt forth thereby weakening the distinction between advisers and bancassurers.direc sales forces.

    I would love to find light but I cannot see the end of the tunnel.

  10. My hope is that Gay will walk the plank
    My fear is that he won’t.
    My hope is that Bob Crowe would be appointed to put a bit of stick about.
    The problem with organisations like the AIFA is that they are run by people who are probably very nice, but are to put it bluntly, effete.
    Ditto Tyrie of the TSC. You only have to look at the correspondence between Tyrie and sants to confirm this.

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