The Chartered Institute for Securities & Investment has warned of unintended consumer detriment under the FCA’s proposed inducements ban.
The CISI says while “extravagant hospitality gifts and monetary inducements are clearly unacceptable”, a blanket ban could restrict the opportunity for optimum knowledge sharing, networking and mutual understanding of products and services available across the industry.
The professional body says: “If firms feel as though they cannot take a client, competitor or supplier out for lunch, or accept a space at a conference, for example, then opportunities for people to understand each other will be missed.”
It adds: “These activities offer the possibility of collaboration, communication and development, which ultimately benefit the end user, and an outright ban may prove to ultimately disadvantage consumers.”
The CISI has also hit out against the FCA’s proposals that minimum qualifications should apply only to staff that give “personal recommendations” – or advice – as opposed to those offering guidance.
It says: “This move is counterintuitive and could result in a detrimental end result for consumers.
“Customers expect to deal with suitably qualified professionals, who they trust, when having discussions about their finances.”
Given the sector is tainted by historical mis-selling scandals, in taking a more narrow stance on requisite qualifications, the CISI says the FCA’s stance is not helping restore consumers’ trust in the sector.
It adds: “While there will be many informed consumers who will appreciate the difference between recommendations and guidance, there will be many – perhaps more – who are not aware of this subtle difference.
“In any case it is our belief that clients would expect the individual they are dealing with to undergo training and competence and have relevant qualifications, irrespective of whether they are providing recommendations or guidance.”
That said, the CISI “broadly welcomes” the FCA’s proposals over complaint handling and consumers’ ability to access the Financial Services Compensation Scheme whether advice or guidance was offered.
CISI chief executive Simon Culhane believes that as technology helps reduce the cost of training, expense should not be given as a reason for firms to limit the number of staff gaining useful and necessary training and qualifications.
“We are not convinced that the FCA has analysed exactly how these two issues, of banning inducements and restricting qualifications, are likely to ultimately hurt the end user, the consumer.”
He adds: “The CISI invites the FCA to engage us in a discussion about how T&C can be delivered in a cost-effective way to a wide audience, as we strongly believe that there is nothing to gain by shrinking the knowledge pool.”