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Aifa policy chief Strange says adviser-charging is a ‘distant dream’

Strange: ‘Practicalities of delivering such a huge change are getting more difficult’
Strange: ‘Practicalities of delivering such a huge change are getting more difficult’

Transact head of sales and marketing Malcolm Murray has alerted IFAs that they may risk fines in the future if they fail to document the suitability of their chosen wrap for every individual client.

At the Money Marketing RDR Invitational in London last week, Murray said the FSA may fine advisers who have not justified their decision to place a client on a particular wrap in writing.

He said: “I beg IFAs – make sure that the wrap you have chosen is suitable for every single client that you put on it and test the suitability against the due diligence that you will apply to that particular wrap service.

“Then make sure you put that in writing, give it to the client and keep it on file because in five years time you might be very happy, the client might be very happy, but the FSA may not be unless you have that in writing. So please, do not get into a situation later on where everybody is happy except the FSA and you get fined for not having made the recommendation in writing.”

Aifa has warned it is becoming increasingly unlikely that adviser-charging will be successfully implemented by the end of 2012.

At the Money Marketing RDR Invitational in London last week, Aifa policy director Andrew Strange said that while he supports adviser-charging, it is a “huge, fundamental change” for advisers and providers to make to their business models.

Strange said: “Aifa supports adviser-charging but the industry has to be able to deliver it. The more I speak to firms, be that distributors, providers or investment management firms, the more I worry that our shared dreams of putting adviser-charging in place are really a distant dream.

“The practicalities of deliver-ing such a huge, fundamental change to the way we work are getting more difficult as the rules become clearer.”

Strange was critical of the FSA’s work on broadening access to advice, claiming the RDR has failed to address the financial needs of consumers.

He said: “The FSA has failed in its objective to have more consu-mer wants and needs addressed. Oxera’s research indicates the RDR will bring both a reduction in numbers of firms and numbers of advisers and whichever way you cut the proposals, an additional cost of £1.7bn. This makes the provision of advice more expensive, which means fewer consumers will access advice.

“You could argue that IFAs will become more profitable businesses, serving fewer people, but our original question was around consumer access, not firm profitability, so I am afraid that in terms of more wants and needs being addressed, it is a fail from me.”

Strange also warned that any effort to make membership of a professional body mandatory would contravene the Human Rights Act.

He says: “I think professional bodies have an important role to play for advisers who wish to support them. I do not believe that mandatory professional body membership is compatible with the Human Rights Act and anything that resembles compulsory membership by the back door to try to circumnavigate this could face legal challenge.”

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Exasperated me 7th May 2010 at 12:11 pm

    Where did Strange find any reference to a professional body?

    After all these years of reading what these representative bodies say it has become clear that they don’t have much of a grasp on what is going on.

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