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Could Henry VIII regulation rein in future IFA trailblazers?

Earlier this week, Aifa director general Chris Cummings warned the FSA’s recent change in regulatory focus could lead to Henry VIII-style supervision from the regulator.

Cummings believes Hector Sants’ now infamous “BE VERY FRIGHTENED” speech ushers in a new draconian regime in which front line supervisors have the power to holler “off with their heads” at any business line or idea that does not fit their more prescriptive thinking.

Such a move is full of hazards. The potential dangers are well articulated by Sants himself in his speech last month. He warned this “fundamental change” in supervision carries significant risks that judgements may not be right with hindsight and that too aggressive an intervention will stifle innovation and “reduce risk to a level that inhibits economic prosperity”.

This move to out-comes focused regulation hands significant extra powers to the FSA’s front line supervisors, many of whom have little experience in running an IFA business.

Advisers could be forced to change business plans or ditch new projects on the whim of such supervisors.

In this post-Northern Rock regulatory world is there a danger such supervisors will be overly cautious in their interpretation of “foresight regulation” and unwilling to accommodate new innovative structures or initiatives?

The IFA sector has always been proud of its ability to reinvent itself to deal with whatever market trends, the Government or the regulator has thrown at it over the years.

Is Chris right? Could innovation in the IFA sector be threatened by this regulatory move?

Would IFA innovators like Ken Davy, Paul Hogarth and Tom Baigire have been able to achieve what they did if FSA staff were placing barriers in-front of their new ideas?

Is there a danger potential new innovators in the IFA space that we are yet to hear about will be snuffed out before they get a chance to shine?

Let me know what you think.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Stephen Phillips 3rd April 2009 at 3:51 pm

    Henry VIII regulation
    Hector Sants may say that regulation is to become stricter in future, but I very much doubt that this will apply to banks, which are far too powerful for the FSA to take on.

    Instead, they will undoubtedly focus on IFAs – as usual.
    May I suggest an alternative? To get the economy moving again, simply sack a bank chairman or CEO every week until they start lending to small businesses again!

  2. Julian Stevens 3rd April 2009 at 4:51 pm

    The phoney new world of regulation
    Since when did the FSA ever confess to a shred of remorse for the consequences of its judgements having, with hindsight, turned out not to have been right? Are we about to see a step change in the attitude of the FSA towards the sector of the industry (i.e. IFA’s) on which its past policies have inflicted so much damage?

  3. Henry VIII
    Typical burearocratic response to their own failings, look fierce and snarl at people who can’t resist. Do something that distracts attention fropm one’s own failings, and grab a few headlines to show how tough you are. It is not the IFAs and mortgage brokers who ruined the country, it was inept regulation, slack government and corporate greed, but guess who will bear the brunt of the face saving exercise? You and me.

  4. Henry VIII style regulation
    Some heads should roll – NOW. The FSA and the Bank of England are happy to blame everyone else whilst ignoring their own incompetence and lack of awareness. Eddie George, Mervyn King and all the senior FSA staff should be strung up whilst Gordon Brown, the architect of this disaster, should be hung, drawn and quartered….very slowly.

    Then, bank CEOs should be stripped of their ill-gotten gains and IFAs should then be left to rule the universe.

  5. FSA are pussy cats
    The FSA’s rule-making powers are, under the Act, vested in the Board and not in front-line supervisors.

    Supervision may ask. And if it doesn’t like the response, can hassle you a bit with their various ‘regulatory tools’. But ultimately, if you stick to the rules and the spirit of TCF by making it clear how you add value to your clients, there is little they can do to get in your way.

    Its precisely because of their lack of practical IFA or product-technical knowledge that you deal with their seemingly harsh comments simply by explaining things to them…assuming of course that you’re sufficiently knowledgeable and you’re prepared to give them the benefit of your wisdom…

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