Chris Cummings only had a couple of days left as Aifa’s director general when Money Marketing caught up with him last week but he was still full of passionate views about the sector.
He is positive about the future for IFAs who manage to reposition their businesses but warns that the FSA’s failure to create a clear split between sales and advice will continue to haunt the industry. Cummings, who has spent seven years at Aifa the last five as director general, says his biggest regret is the failure to deliver a clear separation between sales and advice as part of the RDR negotiations.
He believes this is fundamental to restoring confidence. “It comes down to what is the motivation of the person sitting across the desk from you? If you visit your family doctor, you never for one minute think he is a pharmaceutical drug salesman. They earn money when they write
a prescription but that is not their motivation.”
At one point, it looked like a clear RDR sales/advice separation was on the cards but the FSA backtracked following heavy pressure from the banks. Cummings says: “The FSA caved in to political pressure but I do not think this is an issue that will go away. It will continue to come
back to the table until people have clarity about who is advising them on what.”
Aifa’s recent Advice Horizons Paper suggested members should seriously consider the restricted advice option. Cummings says the paper offered a balanced rather than a glowing assessment of restricted advice. He says: “We were trying to reflect for those people suggesting restricted advice would be the easier route, that may well not be the case.
It may be less risky but do not make a big decision for your firm based on a misapprehension about what restricted will mean.”
Cummings took over as Aifa director general in 2005 as the FSA was implementing its depolarisation regime. Following a member consultation,
Aifa decided against allowing multities to join. “No trade body has a life independent of its membership. Big decisions like that sho uld only be
made by members.”
Aifa will have to make a similar decision on whether restricted advisers will be allowed to join. Again, Cummings suggests a member vote is the best way. “All the council members are elected so that gives it a legitimacy on this issue but I think something as big and as fundamental as this should always be thrown back into the hands of members.”
Aifa has lobbied hard for the FSA to be more pragmatic on the introduction of new mandatory qualifications from 2013.
Has the battle over qualifications now been lost?
Cummings says it is regrettable the FSA was convinced by “people who saw a commercial advantage in getting competence to only mean qualifications.”
He says Aifa has helped move the FSA to allow alternative assessments but he thinks it is highly unlikely the regulator will back down further.
“We have built our voice on increasing professional standards to create a better respected profession so it was never a step we took lightly to present alternatives to qualifications but the overwhelming sense we got from talking to politicians, regulators and consumer groups was there has to be some tangible evidence of an increase in standards and that has come to mean qualifications.”
“We now have the banking community putting their people through the qualifications. It would seem odd for the part of the sector that claims to be the profession to be the one arguing against qualifications.”
He says Aifa took the decision to launch its own qualification to offer greater choice to advisers. “There are some people who will go through a Rolls-Royce option and there are others who just want a permission to trade.”
Cummings says setting up the Association of Mortgage Intermediaries when he joined was one of his biggest achievements. “AMI gave mortgage intermediaries a voice for the first time.
We worked hand in glove with the FSA drafting the mortgage rules and, without that, mortgage intermediaries just would not have had a look in.”
He also points to AMI’s lobbying of the European Commission three years ago to protect procuration fees which would have been banned otherwise.
Cummings says he is proud of driving up Aifa membership rates from around 60 per cent to 88 per cent of IFAs and making it the first port of call for policymakers at UK and European level.
He points to the fact that Aifa’s recent work on savings culture was picked up by the Treasury and it was the first trade body to publish an analysis of the credit crunch, which he says influenced FSA chairman Lord Turner’s view on the crisis and his subsequent report.
His other big Aifa achievements include getting the FSA to agree that advisers can pay their fees by instalments and driving down regulatory costs by £11.7m last year. “Every year for the last seven years there are a number of things that we could turn around and say that is what your £250 paid for this year.”
Another of Cummings’ major regrets has been the infighting within the advice community, which he blames on the fact there are “too many hands in the IFA’s pocket”.
“We are the smallest and least well capitalised part of retail financial services and there is always a turf war between those bodies who are trying to be the professional bodies, trade bodies and other groups. It is in the vested interests of too many groups to keep the IFA community
fractured and small.”
But is the RDR likely to lead to a further fracturing of the advice community?
Cummings says Aifa chairman John Gummer has always been passionate about setting out the values that unite the advice profession and there comes a time when these values need to be renewed.
He says: “If these values hold true, then it is worth talking about a single profession but if the values do not hold true then people need to go in different directions. The advisory profession has been built on putting its clients first. If we get to a point where that is no longer the case then it
will become harder.”
Cummings points to the way the banks stuck together in the middle of the economic crisis as a “textbook case” of how to lobby effectively.
He says: “We must focus on the things that unite us as a profession and do not listen to those people whose vested interests are to pull us apart.”
Cummings has been attacked by some advisers in the past for not being more aggressive in his dealings with the FSA. He rejects the view that a more antagonistic approach would have reaped better results for IFAs. “I understand why people feel that standing on the street corner and shouting is effective, there are some days I want to do that to. However, is that really the way to represent a profession?”
“Surely it makes more sense to be in the room negotiating because then people treat you with respect and dignity and will listen to you. I make no apologies for how I have conducted negotiations. I think we have a track record of success.”
Cummings says the IFA community is unique within financial services as being on the side of the consumer and Aifa must continue to lead the big debates from this perspective.
“My view has always been if it is right for the consumer it is also right for the adviser as we sit on the same side of the desk as the consumer and across the deskfrom the provider. Whatever is in the long-term interests of the client is going to be in your long-term interests.”
Does he have any advice for his successor Stephen Gay coming from a product provider background?
Cummings says Gay must not be afraid to lead from the front to give politicians, regulators and advisers the confidence that he is the right man to lead Aifa through the biggest stage in its development. “I have every confidence that he can do it because he has a fantastic team here at Aifa and a really good council. If people are unsure, get involved, stand for election and have a bigger say.”
Cummings says the future regulatory focus must be on getting more people saving and protecting themselves. As well as looking at the new regulator’sstatutory objectives, Cummings believes much will depend on the culture within the new regulator. “We have allowed a generation to grow up with the assumption they do not need to worry about their retirement and setting money aside or protecting themselves.”
He says there must be a greater focus on personal responsibility. “Regulation was never about protecting people from making fools of themselves. If you invest in something risky and it does not work out, that is not the fault of the financial services industry.”
Cummings says it has been a privilege to represent an IFA profession made up of people focused on doing the right thing by their client. “Advisers are smaller organisations trying to do the right thing in a system that is designed to work for big organisations. Sometimes it can feel like the chips are completely loaded against us.
“I think everything we have managed to achieve against that background has been quite remarkable. The joy has been doing it for the members, people who I would trust with my money. And yes, I do have my own IFA.”