The FSA has been hugely critical about the standards of advice given to the public involving just about everything in the process, including disclosure, bias, assessment of risk and offering a genuine fee option, to name but a few.
The FSA says it will take enforcement action if it needs to.
The result is an interesting stand-off. The practitioner panel – the financial services’ industry representative body at the regulator – does not believe the mystery-shopping exercises are rigorous enough and are not statistically significant.
Aifa is also concerned that the FSA has lumped together all types of advisers in this work and it insists that the main culprits to be condemned for shoddy advice are banks and tied firms.
What are advisers to make of all this? The first point is that the FSA does not really have to be fair. The organisation with the teeth in this stand-off is the FSA. IFAs should read the report and make sure their practices are in line with the best practice demanded by the FSA.
However, morally, the FSA has a case to answer. By releasing this report, it has done some damage to reputation of the sector. If its research is justified, then that is simply a fact of life in a regulated market. But what if it is wrong? And what if the research is wrong but it is then used to inform either FSA or Government policy? Ministers already have a prejudiced view and this will reinforce it, whether it is statistically justified or not.
Money Marketing would argue that, as a matter of urgency, and in a bid to try to create a better understanding between regulator and regulated, the FSA must come up with arguments to justify its methods of working, in the light of both sets of criticism. These should not be simply PR arguments but proper
arguments which also take the criticism seriously.
At the same time, it is still worrying there are still some aspects of the advice process which leave a lot to be desired regardless of which part of the advice sector is getting it wrong.