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Apfa: FCA ‘irresponsible’ over pre-RDR trail comments

Apfa director general Chris Hannant

Apfa says the FCA is “irresponsible” for floating the idea of switching off all pre-RDR trail commission and questioned whether the regulator would have the legal power to unravel existing contracts.

Minutes from the FCA’s June board meeting, published last week, flagged “whether the lack of end-date for the payment of trail commission on pre-RDR business might lead firms to act in ways that risked poor consumer outcomes,” as an area of concern. 

Apfa director general Chris Hannant says this is a “knee-jerk reaction” to initial findings from the FCA’s small thematic review last month into RDR implementation.

He says: “We are barely seven months into the RDR, and for the FCA to start recklessly talking about re-writing the rules is slightly over the top. The FCA needs to understand it has to provide a stable framework for people to do business. Quite frankly, there are bigger risks and the regulator has a long documented record of missing most of them.”

Hannant says ongoing payments will often have been part of legal contracts set up when the advice was given.

He adds: “To change that would be unpicking that contractual arrangement. I do not know whether it is clear the FCA can do that. The regulator cannot tell firms to go ahead and rely on these payments and then threaten to remove them months later. It is ridiculous and irresponsible.”

Thameside Wealth director Tom Kean says: “It is outrageous the FCA is considering rewriting the rules like this. It is because the regulator’s RDR thinking has been so woolly and ill-thought through that gremlins like this are now coming out of the woodwork.”

The FCA declined to comment.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. incompetent regulators 15th August 2013 at 9:56 am

    There is no way that the renewals can be factored back into the products as insurers systems couldn’t cope with it.

    All they will be doing is removing trail commissions from FA and IFA and give it to the insurers, thus giving them reasons to break their promised terms of business. Call this a democracy? More like theft!

  2. Unsurprisingly I think APFA is right. But what I find so disappointing and depressing is that the seemingly emollient utterances from the new FCA at outset, promising a new approach and a new era in regulation, does not seem to have materialised.

    We have had confrontational regulation far too long and it is well over time that the initial indications from Canary Wharf are realised. Yes; we require regulation. No; we don’t expect a cosy arrangement. But is it too much to ask that we can now hope and expect mutual respect, considered statements, no more ‘shooting from the hip’, a non-confrontational approach, and an end to regulation by edict, a cessation of wisdom and regulation by hindsight and hopefully a significant moderation of the constant stream of ‘bumph’, messages and instructions coming from No.25.

    Well we can all have our daydreams!

  3. I think the most telling part of this article is the very last line -:
    The FCA declined to comment !!!

    This really says it all, We are un accountable to you and your ilk so go away !!!

    They can flit in and out of accountability when it suits them

    On a more positive note well done Chris,

  4. Is this just another example of the FCA simply not really understanding how our industry works? I just wish that the IFA had some serious clout to deal with these kind of suggestions. Why can they not comment?

  5. It doesn’t matter what anyone may think about the rights or wrongs of an existing contract. A contract is a contract and no one has the right to make changes without the consent of all parties. Any change made with the consent of all parties will simply be theft.

  6. not to mention open to a legal challenge John.

  7. Since when did the FSA give a damn about the law? It makes its own. It’s a law unto its own self. The law of the land is supposed to protect us against stale complaints in respect of advice given more than 15 years previously, but the FSA summarily and arbitrarily removed that protection. There was no consultation. Why would there have been? The response would have been uniform opposition and the FSA would have just gone ahead anyway, claiming merely to have “taken on board” the responses it received (but, as usual, without ever publishing them for all to see and to debate in open forum). So it just didn’t bother, and it’s the same with the removal of trail commission on pre-2013 business already on the books. Does the FSA give two hoots about existing contractual agreements between intermediaries and their clients? Of course not. The FSA has the fixed idea that all intermediaries just take the trail but do nothing for it, so it’s going to go. End of. And by the way ~ don’t be late paying your next round of increased levies or we’ll shut you down.

    When asked by the TSC back in 2011 why the FSA shouldn’t restore to intermediaries the protection of the longstop, Hector Sants said: Because we don’t see how doing so would be of benefit to consumers. With such an answer it can justify pretty well any injustice it cares to impose and the various immunities it enjoys mean that there’s nothing that anyone can do about it.

    The only way forward will be the creation of an Independent Regulatory Oversight Committee with the unassailable authority to say to the FSA: This is wrong and you aren’t going to do it or, having already done it, you’re going to have to undo it. What other solution can there be?

    The FSA is an unbridled monster with the freedom to trample roughshod over anyone or any body that dares to try to stand in its way. Individual dissenters are either ignored or crushed underfoot like some tiresome and inconsequential insect. All that’s happened over the past 20 years is that this state of affairs has become progressively worse and representations from APFA and such like won’t make the slightest difference to any of it.

  8. Julian the only way forward is to vote UKIP
    The coalition want your vote to put them in power. That is what happens in a democracy.
    They will then use an unelected undemocratic, unaccountable quango to lord it over you any way they please.
    When you complain they will say “we are powerless, they are independent of government and can do as they please, no one can stop them.
    Why use your vote to aid an undemocratic process?

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