Shoring up the rules’ structure
Some people may question why the future regulatory architecture is such a priority for Aifa as a trade body when there are other comp-elling issues to address.
The answer is that unless we worry and unless we make this issue a policy priority today, there is a real danger that the new regime could make life more difficult for the IFA profession in the future. This is why Aifa has been actively engaged on this topic with key stakeholders over recent months and has met with MPs such as Harriett Baldwin and Mark Garnier and why we will continue to do so until the new regulatory structure is finalised.
For us, the oppor-tunity to develop a regulatory regime which facilitates the provision of impartial advice to consumers is paramount. The need for access to advice is magnified by the increased need for people to save for a longer retire-ment and make more and better provision for themselves.
Aifa therefore feels it is appropriate that the overriding purpose of regulation is to encourage better access for more consu-mers, thus leading to better outcomes.
Regulation must also work in a propor-tionate and risk-based way, focusing on those aspects of the financial services industry that pose the greatest risk. It is our view that well-managed, low-risk firms which treat their customers fairly should be given regulatory dividends in order to incite positive behaviour.
Although the history of regulation under the FSA has been relatively short, there have already been a considerable number of waves of different require-ments, resulting in rising costs and regulatory fatigue. Looking forward to the new structure, it is essential that the newly formed statutory bodies should formally have regard to each other’s objectives and have a college of super-visors to ensure cross-body co-operation, coordination and control. There also needs to be far more joined-up working from the policy, supervision and enforcement teams to ensure consistency of delivery across the board.
Cost is clearly another important aspect of the new structure, given the current financial burden faced by firms. It is essential that the new regulator uses its resources in the most cost-effective and economic way in order to deliver the best possible value for money for both the industry and ultim-ately consumers.
Furthermore, regulation must have the appropriate checks and balances in place to ensure accountability. There is no reason to believe that initial objectives, no matter how well intentioned, will be achieved when a new system is established unless there is a rigorous, external process in place to keep it aligned to those objectives.
Finally, we believe it is essential that regulation must take fully into account the increasing amounts of financial regulation emanating from Europe and ensure that the UK is best placed to remain a leading player.
These points all run the risk of looking so obvious that they could easily be dismissed out of hand. But the point is that no matter how the principles for good regulation are espoused, in practice, they have not been delivered and that is what needs to be fixed by the new regulatory structure.
Andrew Strange is director of policy at Aifa