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Could backbench pressure lead to an RDR rethink?

The timing of the Treasury select committee’s sudden keen interest in the Retail Distribution Review has not been very kind to Aifa.

Aifa director Rob Sinclair appeared before the TSC earlier this week, as part of the committee’s review of financial regulation. MPs used the session as an opportunity to highlight the large amount of correspondence they had received from IFAs concerned about the RDR.

It seems that many members of the TSC, particularly Conservative MPs, have a great deal of empathy for IFAs that are worried about the review and are concerned about the advice gap that would be created if a large number of IFAs leave the industry.

The mood of the session turned to one of frustration with the MPs concerned the anger they are hearing from IFA constituents was not being matched by the responses from Sinclair.

But, as Sinclair told the committee, the concerns the MPs put to him during the evidence session are the same ones Aifa has been smacking its head against a brick wall trying the convey to the FSA over the last four years.

It was a very strange role reversal to see MPs grilling Aifa about a perceived lack of support for IFAs who are worried about the threat of rising qualifications and the removal of commission. The last memorable appearance by the trade body before the TSC saw Paul Smee torn to shreds by committee members concerned about standards within the IFA community.

Throughout the various twists of the RDR, Aifa fought hard for a better deal for IFAs. The trade body felt betrayed by the FSA over its U-turn on a clear split between sales and advice and campaigned for the FSA to be more pragmatic about the introduction of higher professional qualifications. Judicial reviews were threatened and former Aifa director general Chris Cummings spent a great deal of time arguing his case in the trade press and at conferences around the country.

Aifa won concessions from the FSA, such as the introduction of alternative assessments, but on the central issue of IFAs being unable to trade if they do not get specific qualifications by January 2013, the FSA would not be budged.

During this lobbying campaign Aifa would have certainly appreciated strong support from the Treasury select committee but it did not seem very interested, despite a great deal of prodding from this newspaper. Perhaps the recent interest can be explained by the new make-up of the committee post-election and the fact the RDR is getting closer and therefore onto the political radar.

In any case, Aifa decided a major confrontation over qualifications was unlikely to succeed with a regulator that was not for turning. It took the view that if anything the political winds blowing in the aftermath of the economic crisis were going to give the RDR more momentum and it has focused a great deal of resources on helping members adjust to RDR through its well received business academy and launching its alternative assessment qualification.

So, against this back-drop Sinclair walks into the committee meeting to discuss the proposed restructure of regulation and is bombarded with RDR complaints.

Sinclair described the 2013 deadline as “unfortunate” but did not give the forthright views about the RDR that MPs were expecting. His response was more of a weary warrior explaining a past defeat in battle rather than the general preparing his troops for a fight that Andrew Tyrie and his committee were expecting.

It is worth remembering that the trade body continues to push hard for more pragmatism from the regulator over the “cliff edge” qualification requirements and continues to spend a great deal of time lobbying these same MPs about concerns around consumer access to advice.

Will this groundswell of MP support have any effect on the direction of the RDR?  Conservative MP Harriet Baldwin’s Westminster Hall debate was supported by a decent number of MPs and Tory MP Mark Garnier is attempting to get a full debate in the House of Commons. You get the feeling it is an issue these MPs will continue to push.

Treasury financial secretary Mark Hoban was certainly forthright in his rejection of the arguments against the RDR his backbenchers were putting forward. But I have read and heard many passionate and articulate arguments in favour of higher qualifications and more transparent charging structures and Mark’s performance was not one of them.

The McDonald’s reference was unnecessarily antagonistic and some of the statistics he used to back up his arguments were shaky. Hoban spoke at length but did not do enough to address the specific concerns about older advisers that were the focus of most of the MPs’ concerns.

If this is an issue the Treasury select committee decides to take up and campaign on a certain amount of political pressure will be put on the FSA but it is unlikely to be enough to lead to a significant U-turn.

Behind the scenes, FSA staff are sympathetic to some of the arguments around consumer access to advice but the momentum is still firmly behind RDR implementation, as witnessed at today’s CII RDR conference.

However, if as we move much closer to RDR it becomes clear that a large number of IFAs will not meet the new requirements, you would expect more pragmatism from the policymakers.

The new regulatory framework needs to encourage more people to seek advice and take responsibility for their own financial affairs. The need for decent financial advice is only going to grow and the Government and regulators need to ensure there will be enough people around to deliver it.

Paul McMillan is editor of Money Marketing – Follow on twitter here.


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. When the lunatics are running the asylum? I won’t hold my breath.

  2. “Sinclair told the committee, the concerns the MPs put to him during the evidence session are the same ones Aifa has been smacking its head against a brick wall trying the convey to the FSA over the last four years.”

    Which is why AIFA intends from now on to pursue its case via parliament. The FSA is an immoveable brick outhouse populated by blinkered souls who refuse to recognise and address the realities of their own dilemma, which is their impotence in the face of the banks. The RDR is primarily just a mendacious distraction from that dilemma.

    As for Mr Hoban ~ there’s a new burger now on sale at McDonalds. It’s called McTosser. Why don’t you try one?

  3. It would be good to see some real common sense from government and a runaway train of an organisation, the FSA brought in to line.

    What was extremely worrying was Mr Hoban’s comment, and I assume this is correct considering his position, that the FSA does not answer to the treasury on regulatory matters?

    If this in fact true, I would like clarification of this, then I would like to know what system is in place to control or keep in check the FSA.

    If the complaints procedure is the means to this end then we all should be made aware of this as we can all lodge official complaints if this is the procedure we are supposed to use.

    So in summary, what is in place to control the FSA and how is the industry supposed to use this system or report to the system which controls them?

    We were led to believe they reported to the treasury.

  4. It was revelaing that AIFA did not manage to lodge a submission in respect of the TSC’s call for evidence, the deadline for which was 22 September.

    AIFA also famously warned IFAs from lobbying their MP’s suggetsing that it was counter-productive.

    It seems that the only counter-productive aspect has been AIFA itself.

    Let us hope that Stephen Gay’s arirval signals an about turn in both approach and courage.

  5. Unlikely as Mr Hoban has made it very clear he has no interest in listening to concerns about RDR from anyone and neither do the FSA, so it WILL happen unless they open their eyes and ears.

  6. AIFA have lost its way in the fug of demoralisation. CII have decided that its a great way to make money and a couple of others have followed.
    The FSA a Gordon Brown baby is just intent on spending other peoples money even borrowing to do it. Sound familiar?
    All the people that started the RDR have gone and the only element that might have benefited the consumer dropped.
    So around and around we go cost now to be £1.7 billion (say it quick) to achieve almost nothing that’s Gordon Brown value for money now where did I put that burger?

  7. According to the CII, and I quote, “The FSA is answerable to the Treasury for the way it carries out its duties and the Chancellor of the Exchequer bears ultimate resonsibility for the regulatory system”.
    Where was the Treasury and Chancellor of the previous Government when the FSA failed in its duty regarding Northern Rock, Banks, Keydata etc.etc? they also failed to act.The FSA failed big time and concentrated on finding ways to justify their existence and unfortunately the IFA community seemed an easy touch.
    We now have another Treasury Minister who seems just as uneducated about the financial services and devalues our expertise and experience over many years.
    What hope do we have not only as IFAs but also individuals if we have these sort of MPs running our country.
    Emigration seems to come to mind.

  8. We are not out of the wood yet, please continue voicing your concerns with your local MP. I am for exams, experience, commission, fees but most of all a common sense approach encompassing all of these diferent issues in a sensible timeframe that does not harm Financial Adviser careers and the need for financial advice by the public no matter their individual financial circumstances.

  9. Do you honestly expect to get a response from your MP? I sent a letter weeks ago and have not even received an acknowledgement, so I would not hold your breath!

  10. This is not about RDR this is the ned game for independent advice.

    Several members of the TSC were at the meeting and contributed to an IFA positive debate. All in all the IFA was well represented until Mark (Rubber Stamp) Hoban MP got to his feet and lowered the tone of the debate especially by his refusal to take questions and of course his McDonalds attack.

    The McDonald remark was a well thought out and calculated insult! I seem to recall it was a burger that stuck in John (AIFA) Gummers throat following the mad cow incident so maybe Hoban will choke on his words too especially when his second home claims equals £82,662 which at £3.70 per McDonalds meal would by 22,351 meals – eat that Hoban!

    As for the other MPs at the debate I would suggested that they would feel equally slighted at Hoban’s offhand refusal to take questions. I noted that Mark Garnier MP (TSC) was quick to suggest (and Harriet to agree) that a motion should be put in for a three hour debate! Maybe a three hour debate will give Hoban the time to choke on his burger and answer the many questions that he refused this time round.

    Yesterday the TSC nailed AIFA to the wall over their failure to defend older IFA’s. Personally, I didn’t know AIFA were anti grandfathering. I wonder how many AIFA members were aware of that and were funding such views with their membership fees.

  11. Can the CII clarify if the complaint procedure lodged against the FSA would force them to sit in front of the Treasury?

    2,000+ complaints about one regulatory matter should force an enquiry from the new government?

    The MPS at that meeting outside of Hoban were very knowledgeable so an official meeting could yield results?

  12. THE DEBATE AND HOW IT CAME TO PASS 21st October 2010 at 6:43 pm

    The debate 20/10/10 was a direct result of grass root IFAs taking action and bypassing AIFA and PFS who have so badly misrepresented the IFA community.

    Astley-based IFA Mike Jeacock arranged this meeting and it was chaired by Simon Mansell. Julian Stevens travelled up from Bristol and Neil Liversidge travelled down from Yorkshire. 20 other IFA attended. Neil and Julian spoke eloquently as did the other IFA too numerous to mention here.

    As a result Harriet Baldwin, Mark Garnier and Robin Walker were astonished at how badly treated these IFA had been.

    At the time AIFA rounded on these IFAs and criticised them for “crude lobbying”. In response many members of Positive Solutions resigned on the stop from AIFA and Cummings was forced to backtrack. The IFA meeting had upset Mark Hoban who as a result had pulled out of a key note speech. I understand Mark Hoban and Chris Cummings were best of friends.

    The Baldwin debate 20/10/10 shows what can be done. Grass root IFAs felt that their so called representative bodies had let them down and took positive action on their own and without support or budget or fees.

    Now for those IFA who have fought thus far thank you and keep going. For the many that have done and said nothing now is the time for your to join in this fight. Next stop a three debate on the floor – book your meeting with your MP and go see him/her now!

  13. If 30,000 IFAs had turned up to the meeting, then maybe they would have taken more notice, including the press. Also cuts have recently been announced, and I am amazed that the treasury have not taken up the Axe. Maybe RDR is like an aircraft carrier and would cost more to stop.

  14. I am constantly surprised and dismayed by the lack of qualifications, knowledge and humility shown by the FSA.

    That the treasury, chancellor or whomever they report to has allowed them to continue is equally astounding.

    For an organisation that has demonstrably failed and continues to fail in its stated aims to continue its course unabated is a travesty of democracy.

    I hope that MPs – who show remarkable common sense when left to their own devices – see through the FSA’s weasel words and stop RDR in recognition of the fact that the only winners will be the banks and those that ascend to the lofty heights of their boards after leaving the FSA.

    I hope that democracy can be shown to work, but fear it will be proved to be another failure.

    Don’t forget, this is the same system that allowed the banks to reap enormous profits from the system that caused the credit crunch and they are now reaping enormous profits from the system provided to save their jobs.

    This is theft on a staggering, breathtaking scale. It is the passing of wealth from the ordinary working man and woman (both IFAs and their clients) to the bank hierarchies.

    If you are an IFA fighting for this cause, good on you, but I feel you may be doing so in vain.

  15. I would like complete transparency with the accounting of the FSA. Since we (the Financial Industry) are paying the bill aren’t we entitled to know how are our money is being spent?
    Why do they need £160k spending on artwork or £210k spending on vehicles and an undisclosed sum on chauffeurs? How do they justify such large salaries and gold plated pensions when doing such a bad job? Any private business run in this manner would no longer be trading, so why is the FSA so free with ‘our money’ and then has the audacity to try and keep spending of it a private matter? There is no way they coiuld justify such gross inadequacy!

  16. I really hope there is another debate. I couldn’t get to the last one, due to the short notice and being away, and I could have kicked myself.

    Really good comments here and I know the guys who are trying their best for all of us concerned IFAs will keep up their efforts. They have common sense and justice on their side and I thank them for their persistance.

    On a totally separate note I am glad I re-read this, for once, as I had written I could have licked myself, which might have given the wrong impression.

  17. As an IFA I have decided to change my title to an Independent McAdviser and I require a McDiploma to stay in business beyond 2012.
    Also I am planning to move my office into the local McDonald’s branch and use my ‘Commission Gluttony’ account to feed on big Mac’s & fries all day long!

  18. Wake up and fight for your jobs this is a chance to make the bully boys think again.

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