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Can you teach an old watchdog new tricks?

We all know the current system of regulation has failed, somewhat miserably, to keep markets under control.

The European Union, the Tories, the FSA and a whole host of other interested parties have put forward broad industry-wide solutions, but how will these affect IFAs?

Aifa has today put out a white paper on The Future of Financial Regulation. It looks at all the different proposals in the ring so far, and how they might affect advisers.

The trade body is warning that the twin peaks approach, as recommended by Sir James Sassoon, could result in the UK advice market becoming a replica of the EU bank assurance model.

Sassoon’s review of the tripartite regime, commissioned by the Tory Shadow Chancellor George Osborne, proposed separating prudential and conduct of business oversight between two independent regulators.

Aifa says it is also concerned about the negative consequences of other proposals as well.

It look specifically at the “atomised structure”, which calls for a split between conduct of business and prudential oversight. Under this approach COB regulation would be divided into market subsections, which would then report to a self-regulatory organisation and a college of supervisors acting as an alternative to a statutory regulator.

Aifa says there is merit in this approach but is concerned that dividing prudential and COB may lead to a duplication of regulatory oversight. It says firms might face multiple visits from separate regulators, rather than having an integrated approach which could lead to higher costs for advice firms.

One alternative course of action that has not been widely touted is to leave the system exactly as it stands now. Aifa says there is an argument for maintaining the status quo due to the cost of restructuring the system of financial regulation, which will largely be borne by the consumer.

What do you think? What type of regulation model will best serve the industry and its clients? Should the FSA stay or be disbanded?

Post your comments below.


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. FSA
    The FSA has failed all, customers, advisers and providers. It has driven up costs, which in turn will be passed onto the consumer. It oversaw the failure of the banking system and at the very time it was trying to hand over or at least favour regulations which would on a wholesale basis hand over the distribution of Insurance and financial products to the banking sector.

    It is an organisation with individuals that are not elected or accountable to the people it represents. Let us have an orgainisation with elected representatives

  2. Msytery Shopper for IFAs 6th May 2009 at 5:17 pm

    Change of financial regulations
    IFAs are purely distributors of products, they are not the manufacturer. If the product is faulty then the manufacturer should be responsible. Products should be vetted before they leave the factory gates. The is no point in trying to regulate advice which is a bit like to catch the horse after it has bolted. IFAs should not be regulated at all under the circumstances. There are exams in place, cooling off notices, commission disclosure etc etc. which cliens can rely upon. IFAs should have their own membership bodies which they can join without any compulsion to a gesatpo like regime. If there is a problem with mis-selling, let the courts deal with it, as that’s what they are there for. Most claims for compensation are fraudulent helped along with the biggest Ambulance Chaser in the country being the FOS.

    The banks and direct insureres have caused most of the mis-selling problems so that’s where regulations should be. I’m surprised no one ever saw this before. We have too many busy bodies poking their noses in our business who know nothing. Get rid of the FSA and majke them pay for their mistakes just as regulated firms do.

    Once we are clear of these busy bodies scaremongering we may get people to start taking responsibilty with saving for their retirement etc.

  3. FSA
    The FSA has allowed banks and building societies to “advise” when those organisations are not advising but selling. They fail to regulate banks adequately (if at all); the “light regulation touch,” followed by bankers’ foolishness is what got our nation’s economy into big trouble. They haven’t required bankers to be prudent in lending (4 to 5 times income and 125% valuation always was and still is negligent). Yet they will surcharge a small IFA for being a few days late with the half yearly return! Still a small IFA doesn’t have the financial clout to take on the FSA… The FSA is not fit for purpose and those responsible for the incredible shortcomings should be sacked, without compensation. If the FSA stays, it need a root and branch simplification of rules and it needs to have more careful attention to how it monitors organisations like the banks, fraudulent traders and the important things in regulation. It spends too much time and effort on silly sacred cows, like TCF and COB and not enough time and effort on the bigger picture. Regulation and compensation can and should be simpler and should be funded by a product levy. That way the consumer pays more visibly for the protection it rightly deserves, but wrongly has yet to receive.

  4. SIMON MANSELL - TEMPLE BAR IFA 6th May 2009 at 6:06 pm

    Power corrupts
    Power corrupts; absolute power corrupts absolutely. The FSA is not accountable, is not audited and is not elected. IFA’s are not anti regulation they are anti abuse of powers and so should all right thinking men and women! Reform the FSMA 2000 and bring it into line with the ECHR Act. Give the IFA back his/her human rights and in particular a right of appeal to the courts (not a mere judicial review). Curb the FSA budget, audit its budget and remove its funding from the advisers it regulates. Last of all get the regulars to apply “risk based monitoring” and monitor where the risk is i.e. the banks thatare responsible for 56% of all complaints! rather than the IFA who has only 4% of complaints but a 100% regulation!

  5. Truth in all the above
    All comments above have merit and mileage for discussion. Some are mutually exclusive though. The one thing I don’t want to see is the status quo of abuse of power being maintained. I have had no complaints and yet distrust the F-pack system and the lack of a right of appeal. advice should be just that, an opinion that anyone has the right to hold or express. Regulating advice is flawed as it tries to control thought processes. Intent and justification for advice is where the focus needs to be. Can you demonstrate and justify the advice you have given and the action the client has taken as a result of it. Outcomes is rubbish as the best laid plans go wrong and the worst laid ones succeed, but then a government who promotes a national lottery as a good thing is promoting something where the outcome is an almost certain loss of your original capital stake and the state pension and benefit system is little better/more than a grand ponxi scheme itself!

  6. New Tricks?
    It ain’t going to change until after the next election as the FSA is a G. Brown baby. Unless Joanna has a meeting and declares her utmost trust and relyance upon change. I agree with Simon above power has corrupted them asking for £1 billion to “regulate” for one year is just astonishing.

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