At our recent Money Marketing Interactive conference, I took to the stage to talk about the evolution of advice into an established profession.
This transition has been borne out by the FCA’s recent suitability review. Notwithstanding some ongoing issues with charging disclosure, the FCA found that in the 1,000 advice files it reviewed, 93 per cent were found to be suitable. As mentioned elsewhere in this magazine, such a high pass rate would be unthinkable in the pre-RDR years.
This is something to be celebrated. But instead the fanfare is muted, because the reality for vast swathes of the advice profession of individuals dedicated to delivering a quality financial planning service is drowned out by the perception of a sector beset by rogues and charlatans.
The reality of advice is lost every single time poor advice is given, every time an unsuitable unregulated investment is sold, and every time a firm is declared in default by the Financial Services Compensation Scheme.
Increasing levies are painful, hurtful and frustrating in equal measure. But as damaging as they are to advisers’ bottom line, they are just as damaging, if not more so, to the perception of advice firms and overall consumer trust in the sector.
The reality of advice is lost every single time poor advice is given, every time an unsuitable unregulated investment is sold, and every time a firm is declared in default by the FSCS.
This week we unravel the case of what happened when one firm amassed a £1m claim bill on the FSCS through the misselling of unregulated investments.
Despite a raft of alternative options to recoup investor and creditor losses, for various reasons the FSCS has ended up as one of the first resorts for redress, rather than the last. The FSCS is footing the bill, which of course translates as advisers footing the bill.
The story is a prime example of just how broken the model is for dealing with collapsed firms which gave bad advice.
The tiny glimmer of hope in all this is that the FSCS funding review is ongoing, with the FCA particularly keen to dissect the areas where professional indemnity insurance is failing.
This is heartening. But advisers have been clamouring for reform for years. The consultation on FSCS funding reform has been out to the market for six months, and the call for regulatory action long precedes the launch of the consultation in December.
All parties, including the FCA, the FSCS and PI insurers, need to grasp this nettle, and fast. The reputation of the advice profession depends on it.
Natalie Holt is editor of Money Marketing. Follow her on Twitter @Natalie_Holt_MM