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Chris Hannant: The FCA needs to cut advisers some slack


Last month, the Association of Professional Financial Advisers called on the FCA for a regulatory dividend for advisers. One thing that is clear about the impact of the RDR so far is the reduction in the numbers of advisers.

FCA figures show there were 26,000 advisers before the RDR, compared with about 21,000 now. There has been a slight pick-up as some more passed their final exams but, overall, this is still a significant fall.

Apfa is not alone in its concern about the impact of the RDR on consumers seeking advice. The point was acknowledged by Martin Wheatley in his appearance before the Treasury select committee in September. 

This is vital at a time when Government policy on pensions and long-term care is placing an emphasis on people making their own provision for financial well-being.

As we see it, the sector needs to rebuild itself and the regulatory environment should be more conducive to advisers running their businesses. 

We are not suggesting lowering standards but helping firms grow, develop talent and encourage more young people to join the profession.

In light of its new competition objective, we think the FCA should share these aims. It must recognise that a healthy number of advisers is good for consumers and that there are things it could do to help deliver this.

There are several things the FCA could do to help reduce the regulatory burden on adviser firms. These include:

  • Reporting requirements – Streamline the data it collects from advisers and increase time to report from six weeks to three months.
  • Consumer credit – Ensure the regulation of firms where consumer credit is incidental to their main business, such as advisers, is proportionate to the risks they present. For example, advisers whose clients pay in instalments do not pose the same risks as payday lenders.
  • Longstop – The FSA gave a commitment to Parliament that the FCA would consider whether to investigate the case for a longstop as part of its business planning for 2014/15. We want the FCA to make good on this commitment and look again at the issue of a longstop for advisers.
  • FSCS threshold for investment intermediaries – The FSA’s case for increasing the FSCS threshold assumed that the revenues, and therefore profits, of the advice sector will not fall below 2010/11 levels following the implementation of the RDR. In light of the reduction in the number of advisers, this decision should be reversed if revenues and profits do fall.
  • Fees – We believe that following the RDR, the reduced risks to consumers means less regulatory resource is needed to supervise advice firms. The FCA should look again at the way it allocates costs to advisers and reduce their share of the bill.

However, we do not think we have identified all the things that make life difficult for advisers. This is not an exhaustive list and we are interested in the issues or problems you have had. 

If you have any suggestions for changes, we’d like to hear from you at

Chris Hannant is director general at the Association of Professional Financial Advisers



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There are 2 comments at the moment, we would love to hear your opinion too.

  1. The best thing that the FCA can do is make a promise to advisers that their advice will no longer be judged retrospectively. This should include the following:

    1. If a company is ‘authorised and regulated by the FCA’ an adviser should have no hesitation in recommending it, knowing that if it subsequently fails, or we find that the directors had their hands in the till, this is the fault of the FCA and not the adviser. The FCA has a budget of £500m a year – if they can’t spot a failing company, a small advisory firm cannot be expected to.
    2. If a company is A&R by the FCA and markets its products as low risk then advisers can accept that they are low risk. They should not be re-risk rated as high risk when the firm goes bust.
    3. If tax or other legislation is changed retrospectively, advice should be judged at the time it was given, not with the benefit of perfect hindsight.

    Tackle these issues and you will sort out the main issue affecting the advisory community; that potential liabilities simply do not match potential earnings.

  2. I agree with all the points you raise. APFA’s biggest challenge is getting the regulator to take any notice of anything you say, though if you could persuade Martin Wheatley to talk to you face to face, that might be a start and warrant a glimmer of hope. Questions:-

    1. Has APFA designed a streamlined reporting system that would be easier, less burdensome and containing just data that would actually be useful and relevant?

    2. What is Lord Deben doing to build alliances in Parliament for the cause of the beleagured IFA?

    3. What is APFA’s plan for the creation of an Independent Regulatory Oversight Committee?

    4. What is APFA doing to try to get the Statutory Code of Practice for Regulators enforced?

    5. What is APFA doing to try to get the regulator to treat the Networks not as national IFA firms but as collectives of small intermediaries who pose no greater threat to consumers than their directly authorised counterparts?

    6. What is APFA doing towards the creation of a streamlined advisory process (Proposition, Costs, Risks & Tax)?

    Ideas are one thing, but of little value if APFA has no credible strategy for getting them put into action.

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