By the time of my next column, we should have the FSA consultation paper on the menu concept. Pages of FSA-speak and draft rules by the bucketload for the compliance-minded. What excitement.
In all this plethora of detail, the big picture could so easily be overlooked. The menu was created (by Aifa, I admit. I'll come quietly, guv) in the aftermath of CP121. We believed the greater disclosure of the cost of advice sought by the FSA could only work if it was set in the context of its value.
The menu was the means by which an IFA could set out the business's stall, list its services and then say: “Clearly, you have to pay for all this work and all this expertise. Now this is how it can be done.” The cost was related to the service provided, not left in the abstract, and the cost could be met by fees or commission or a combination of both.
That is how the game started and it led to the withdrawal of the defined payment system and to FSA interest in how a menu system could apply to other distribution channels. We expect the consultation paper to outline some system of commission equivalence for tied channels so that a consumer can find out the cost of receiving advice from different sources on a broadly comparable basis. I cannot say how many are sufficiently motivated to do this but I believe firmly that the IFA channel should offer the best value.
Now it is over to you. The FSA may well stipulate to the last level of detail how you set out the level of commission you receive and the level of fees you charge but it will not stipulate how you describe your services. You must have a fair idea of the full range of all you do for your clients. Stick it down on the menu. Treat it as a marketing exercise, not a regulatory requirement. You know what your clients come to you for.
That should be an IFA's first focal point in the menu debate. We may well have detailed issues to pick over on the cost side. The FSA has gone a lot further than the initial concept and did not take dictation from the industry so we may have quibbles and queries. What we also have is opportunity. Let us not lose sight of it.
Now for something completely different. I am still worrying away about PI insurance. It has all gone a bit quieter since the FSA modified its rules but I still feel that we are on the edge of the volcano and that it will not take much to reignite concern. One outstanding issue is the EU requirement for compulsory PI in the insurance mediation directive. We are going to have a go at other EU regulators to set out why inflexible directives make for chaos in the markets.
There is an opportunity to review these provisions over the next year and we will make best use of it. Our EU counterparts were quite complacent about the impact of these requirements until relatively recently and I hope they have been putting pressure on their regulators to understand the seriousness of the position.
Paul Smee is director general of Aifa