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Apfa chairman: Industry needs light-touch regulation

Apfa chairman Lord Deben has called on the FCA to deliver “light-touch regulation”.

Speaking at the Apfa annual dinner in London last night, Deben said he is “amazed” at the level of regulation imposed on financial services.

He said: “I look to the FCA for light-touch regulation. I’m amazed at this Government, which is very keen on not regulating, except when it comes to financial services.

“I wonder why the only area regulation is increasing is financial services, and the most trusted people within that area: advisers. I want the FCA to recognise that regulation can be effective only if it is seen as an ally of good practice.”

Deben warned that excessive regulation risks stifling innovation, and leaving the financial services industry “stuck in the past”.

He said: “I want the FCA to recognise the biggest danger we have is that innovation will be lost. So far, increasing regulation has meant that it has been easier for the regulator to say no than to say yes.

“In many cases they have said no because they just don’t want to have the hassle of maybe getting it wrong.”

Deben added that Apfa will not bow to calls to be a “louder” trade body.

He said: “Some people say why aren’t you louder, why don’t you scream more, attack more. I don’t want to do any of those things because I want to win more. And you win by working with the people who are on your side.”

FCA chairman John Griffith-Jones, also speaking at the event, said the regulator has worked hard to allay advisers’ concerns over the complexity and clarity of its rules.

But he conceded there is still “a little bit of an issue” over the commonly understood meanings of the words advice and guidance, and restricted and independent.

He said: “The RDR was always designed to create the framework for the industry to turn itself into a genuinely qualified profession. 

“And now we are seeing this transformation happening in practice and we want to support the progress that is being made. When we talk about professionalism it is about much more than exams and qualifications – it is a state of mind.

“And we have all learned, somewhat painfully from the banking sector, that the tone at the top is absolutely no substitute for the tone at the till.

“The age-old parable ‘do as you would be done by’ lies at the very heart of good advice. If you would be happy to sell it to your mother in law, you’re probably happy to sell it to anybody.”

Griffith-Jones added that the regulator is currently carrying out its post-implementation review of the RDR, and has an obligation to make as thorough an assessment as possible as to whether the legislation has been worthwhile for consumers.

He said: “The RDR has not been a cost free exercise and we as a regulator must be big enough to admit that we may not get things completely right first time round.”


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There are 21 comments at the moment, we would love to hear your opinion too.

  1. Every year Lord Deben makes these far-reaching and belligerent speeches and we all cheer and say well done and then . . . nothing happens and APFA goes back to kissing the pig and talking about stuff.

  2. E L Wisty (an only twin) 19th November 2014 at 10:35 am

    What a lot of piffle and hot air – despite this man appearing to regard APFA as his personal fiefdom, I cannot recall a single positive contribution that he has ever made, or any occasion when he has gone in to bat against the regulator over a controversial issue. Remember CF Arch cru? You could hear the tumbleweeds at APFA.

  3. Has he been living on a different planet because of the Banks rigging of markets and the actions of some adviser’s, we cannot be surprized by the FCA action. These comments are unhelpful in building public trust in Financial Services.

    I am sorry to say that the level of regulation is going to stay because some in financial services can not be trusted to put clients first. Their are too many people that see the cash and not the clients and that is why we are treated like children.

    If he truly believes this then I would suggest a change in job role.

  4. Rt Hon Sir Arthur Streeb-Greebling 19th November 2014 at 10:44 am

    Why are these dinners always held in London where all the city villains hang out. How about Doncaster or nether Wapping next year. Spread the bullshit around.

  5. E L Wisty – you are right but we do need a discussion about regulations. Right now it is an indiscriminate scatter-gun approach rather than dealing with specific issues and dubious businesses. If you take the development of pension flexibility when you add in FCA rules, FOS judgements and the PI insurers who is going to advise these people who need advice?

    Regulation for all it benefits has become its own worst enemy.

  6. Great idea Lord Deben – so what are you ACTUALLY going to do about it ?
    Track record of APFA and its predecessor AIFA is nothing apart from a load of hot air !!

  7. “The age-old parable ‘do as you would be done by’ lies at the very heart of good advice..”

    That was the most apposite remark all evening and from what I have too often seen why ‘light touch’ regulation will still be a distant chimera.

    Add this to the high risk practices being promoted from No.11 and you may well understand why the Regulator wishes to remain vigilant – if too often behind the curve.

    It is a shame that neither party recognises the basic premise – that No.11 and the Treasury should consult with the Regulator before making policy the unintended results of which the regulator may well have to clean up.

  8. E L Wisty (an only twin) 19th November 2014 at 11:06 am

    @ Greg Heath.

    I totally agree with you, my beef is with John Seldom-Dummer – who should spend more time with his beef burgers (remember that ill-advised PR disaster?)

  9. It really doesnt seem to difficult to do light touch regulation for low risk business. Your ISA/UT or OEIC, PPP or protection etc. This stuff is not difficult or exciting but to have the same regulation for this kind of business as we do for really complex, complicated and “risky” end of the industry. He is right in what he says but as some have asked above, what is he going to do about it? My thought on this can be summed up in 3 little sweet F A.

  10. “the RDR has not been a cost free exercise”. Understatement of the century!

    As I see it (just my personal view), the benefits of the two basic precepts of the FSA’s RDR, namely higher standards of technical knowledge and empowerment of the client in setting (or perhaps limiting) adviser charges, are hard to argue with. Had the FSA/FCA been prepared to kick off with just those two criteria and see how they work out in practice, we might well not be seeing all the problems we are now.
    The two biggest problems are the costs of advice and the bewildering tonnages of paperwork required to document it because of the huge amounts of work required to research, justify and (compliantly) record any recommendations.

    So now there’s an advice gap and the FCA is accusing advisers of writing excessively long and difficult to understand letters of recommendation. It’s always our fault. Do it this way and we’re damned, do it the other way and we’re damned too.

    I submit that the root of most of the current problems stems from the FSA, once it had secured parliamentary approval for its grand campaign for change, having gone completely bonkers, like some pack of mad dogs, and embarked on a programme of endless embellishment to these original precepts. A body should (but sadly doesn’t) exist to yank the reins and say: Hang on a minute, parliament never gave you carte blanche to dream up and impose all these additional requirements. Most of them, notably redefining the requirements of independence, go WAY beyond what was actually approved and are tying up the industry in knots.

    Even Griffiths-Jones appears now to be admitting this, though he articulates no solutions, merely some rather vague undertaking that the FCA will “work with the profession to ensure that RDR part two will be better than part one”. The only way that this can come about, I suggest, is by repealing most of the unapproved embellishments that the FSA gaily bolted on, ad infinitum, to RDR Part one.

    For example, there was, in my opinion, no practical benefit from insisting that IFA’s must examine, compare, discuss and discount all but one or two from the entire universe of potentially suitable products available or undertake a funds-specific comparison of every flipping platform on the market, for an investment of just £20,000.

    If the FCA is genuinely concerned about improving access to advice, a good place to start might well be to review its definition of independence.

    It may not have been perfect (perfection being the FCA’s pot of gold at the end of the rainbow) but, for many years, whilst it was quite satisfactory for an IFA to be able to advise on every product on the market with every provider on the market, it wasn’t necessary for him/her to have to analyse and compare every single one of them for every new client scenario. That’s just bonkers and completely impractical. The vast majority of clients neither need or want all that, much less have to pay for it.

    A much better and more workable foundation for advice would be simply Proposition, Costs, Risks & Tax, with perhaps a brief summary as to suitability. Advisers who want to continue with a belt, braces and kitchen sink way of doing things and whose clients are prepared to pay the unavoidably (much) higher costs that approach entails will be entirely at liberty to do so. Whatever happened to client choice? A comparison might be drawn with shoppers having the freedom to choose between Harvey Nichols, M&S or BHS and Primark. What’s so bad about that? Sadly, the FCA just doesn’t get it. For them, only Harvey Nichols will do. But it just isn’t working, is it?

    As for APFA’s effectiveness in influencing the regulator, I repeat the question raised in these pages just a couple of weeks ago: In 2013, APFA spent knocking on £800,000 of OPM but what does it actually have to show for it?

  11. @Peter Herd | 19 November 2014 10:43 am

    ”I am sorry to say that the level of regulation is going to stay because some in financial services can not be trusted to put clients first. Their are too many people that see the cash and not the clients and that is why we are treated like children.”

    The single most logical and relevant comment I have seen in quite some time! This summary could be cut and paste to many an article in which the comments tend to flair off in all sorts of tirades at the regulator and often highlight many IFA’s blinkered view of our industry.

    Well said sir!

  12. Let’s embrace light touch regulation just as we see the biggest changes to the pensions industry in history – lets allow loads of cowboy firms in to sell their innovative ‘pension freedom plans’ add to that the horrific issues emanating from the banks on a near weekly basis, the traders rigging markets and the ongoing closed-door commercial deals taking place.

    Although it would be great to have light touch regulation in financial advice, the other 99% of the FS industry is a mess.

  13. Please excuse my response, but irony should be responded to in kind.

    here is still “a little bit of an issue” over the commonly understood meanings of the words advice and guidance, and restricted and independent.

    Never, did not see this coming. what issue and can get free advice from MAS and TPAS. Well it has to be advice, they are called ADVICE services. The advert tells me its advice, has been set up by Government, so if they are paying I’ll use it. Well I would if I could be bothered to read the information and literature which makes Lord of the Rings look like a comic book.

    As for what type of advice, advice is advice, you mean there is more than one type, well go to the foot of my stairs.

    Give me strength!. WHEN is the main stream media ever going to pick up on this and start embarrassing these bodies into using common sense.

  14. Every year Lord Deben makes these far-reaching and belligerent speeches and we all cheer and say well done and then . . . nothing happens and APFA goes back to kissing the pig and talking about stuff.

  15. Picking up on H. Katz point, RE-: FCA and behind the curve !

    I had a very good day at a well known race course on Saturday (and yes left with a few quid in my back pocket), but just a little story regards the 3 race; my mate, a fellow IFA put a nice few quid on said horse, well to say it didn’t have a good start was an under statement, when it did finish it was 12 lengths shy of the last horse !! ripping up his betting stub, from now on, I am going to call that horse “the FCA” its so far behind the field its embarrassing and wasted my money !! how true and how annoying do you not think ?

    I believe the FCA work on the premise that by making more rules & tighter regulation it might keep them in the running, how wrong and how expensive is that ? they have us all running backwards in an effort to keep up, evidence again of why they feel they have had to set up the “innovate team” to circumnavigate the mine field of a rule book to help,
    And what should you do if you do step on a mine ? ask Innovate

    BTW I had a nice each way bet on said race and picked up a score !

  16. ” If you would be happy to sell it to your mother in law, you’re probably happy to sell it to anybody.”

    I think that should be stated without the words “in law”, otherwise some people might interpret differently to you.

    PS EL Wisty – But John Gummer was right. And the people who acted as if he’d fed his daughter arsenic were wrong. People have forgotten how ludicrous the BSE scare was at its height. The media was acting as if it was going to be another Black Death. “Experts” were telling us that hospitals would be crammed full of the dead and the dying. In reality, if you were killed by British beef in the 1990s, it was almost certainly from a heart attack after one too many Big Macs.

  17. E L Wisty (an only twin) 19th November 2014 at 2:07 pm

    @ Sascha Klauß

    You are, of course, absolutely right. However, while he may have been factually correct, what horrified (and disgusted) people was that he force-feed his young daughter a burger on TV!

    Just one up from child abuse, in my opinion, and a relevant example of the depths that this political rogue will sink to.

  18. Would that be “light touch” regulation as in Guernsey, Jersey, the Cayman Islands and other offshore locations ? Ask the investors in Arch Cru, Keydata, Mansion Funds, MPL / Centurion, Axiom, LM, EEA etc etc what they think about the benefits of Light Touch Regulation.

    Oh – and ask APFA and the FCA why they allow PI insurers to cover UCIS claims on an arising basis (and then withdraw cover), rather than on a “when advised” basis. this leaves IFAs with no choice but to go bust when faced with claims arising from unsuitable advice given in previous years.

  19. To be honest, I am sad to say (and I suspect the regulator) couldn’t care less what the APFA chairman says he and his organisation are an irrelevance regardless of the content of his annual speech !

  20. @ Julian

    While much of what you say has resonance in my own view the reason why the regulator has made a bit of a dogs breakfast of the Independence question is (and you will probably not like this!) is that they wanted to sort out the Networks who have never truly ever been independent. In this they have had a measure of success as the majority have now become restricted – which in fact is what they always were.

    A pound to a penny says that I’m pretty much on target.

  21. Now that the FCA has stated outright that it has no intention of entertaining any further discussion on its denial to advisers of any longstop and has accordingly cancelled its scheduled second meeting with APFA to discuss the subject, perhaps APFA would be good enough to outline its Plan B. My guess is that it doesn’t have one. The only next step is a Judicial Review but, for that, APFA has neither the bottle or even unanimity of opinion on its council.

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