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FCA asks for cost benefit analysis on long-stop

The FCA has asked Apfa to produce a cost benefit analysis of the introduction of a long-stop on complaints against financial advisers.

At a meeting between Apfa and representatives of the regulator, including head of investment David Geale, earlier this week, the FCA asked for further evidence on the impact of a long-stop on advisers and consumers.

The regulator said it would consider the case for a 15-year long stop on complaints to the Financial Ombudsman Service in its 2014/15 business plan, published in March.

Talks were delayed after the FCA pointed to an EU directive as a barrier to progress. But in December the regulator confirmed the directive would not stand in the way of a long-stop.

Apfa submitted its case to the FCA in writing earlier this month.

It is expected that the FCA will reach a decision by the summer on whether or not to consult on the introduction of a long-stop.

If it decides to proceed, a consultation will be published by the end of the year.

Apfa director general Chris Hannant says: “This was a constructive meeting. It will take the FCA time to come to a firm view and they have said they will do that this year.

“The good news for advisers is that if the regulator was going to say no, it could do that very quickly, so the fact it is taking time is a positive sign. The FCA has asked us to do some further work and we will keep an open dialogue with the regulator.”

Apfa member and Highclere Financial Services partner Alan Lakey, who attended the meeting, says: “The FCA says it is serious about reviewing this. However, a cost benefit analysis would be impossible to calculate – how can you put a figure on the impact of this on advisers and consumers?”

Also this week, Apfa called for an independent audit of the Financial Services Compensation Scheme’s costs after the lifeboat fund’s annual levy rose from £276m in 2014/15 to £287m in 2015/16.

Hannant says: “We believe the National Audit Office should conduct a value for money audit on FSCS’s strategic projects.”



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There are 31 comments at the moment, we would love to hear your opinion too.

  1. Could we have a cost benefit analysis of the FCA please ??

  2. Does this not sum up life these days – the cost of everything and the value of nothing?
    What price do you put on Human Rights? My real concern about the lack of a long stop is the inequality when compared with our professional peers and the manner in which some advisers are personally still liable while most are not. Consumers have a right to be protected but when lawyers, accountants and financial advisers can be involved in the same piece of advice only one party is liable after 15 years.

  3. 32 Years of Hurt ... 25th February 2015 at 10:39 am

    Don’t hold your breath fellas!!

  4. The cost is very simple. No long stop and very shortly no PI, no PI no advisers.
    The cost is a revolt from the adviser community through the European Courts as our human rights are being ignored.
    The cost is admitting that as a regulator you are not fit for purpose as you need to have such an unfair system to cover your own failings.
    The cost is an unfair system that allows consumers to withhold information to gain a favorable outcome when it suits them and their lawyer.

    So the real question is not what would the cost be, this is nothing more then smoke and mirrors.

    The real question is how has the regulation been able to introduce and maintain such an unfair and illegal ruling for so long.
    The real question is why is the regular so unwilling to bring legislation in line with all other industries.
    The real question is at what point does the consumer or should the consumer become liable for their lack of action to review, understand and question their financial arrangements.
    The real question should be why is the regulator so unwilling and able to KEEP deflecting and deferring this review.

    The regulator knows this is not correct, but it suits them, its like a drug, the long stop it is their commission biased, as it gives them a life time to claim against others for many of their mistakes.

  5. N0w that really is rich! All of a sudden the Regulator has discovered Cost Benefit Analysis. Let us now hope (and indeed expect) that every new proposal emanating from Canary Wharf has been through this rigorous process.

  6. Isn’t it strange how the FCA suddenly seems to think that a CBA is necessary to prove the need for a long stop. When it comes to their bright ideas, however, no such CBA is ever thought to be deemed necessary.

    If ever a CBA was ever needed, it should be done to determine the value of the “benefits” of the RDR. This would never be done, however, because it would show up what a monumental waste of money this whole exercise has been. The FCA should hang its head in shame!

  7. Lots of whining thus far in these comments (not unusual!)

    The idea of human rights being infringed is a nonsense. The cost to a long-stop is the reputational risk we all suffer when the tabloids start printing headlines like “financial advisor rogues receive get-out-of-jail-free card as long as they pull the wool for fifteen years!”

    OK, so I’ll never make a headline writer, but I’m sure you get the point.

  8. The FSA should have been required to undertake a C:B Analysis before it summarily and without consultation removed the longstop in the first place. This is just another delaying tactic, so typical of the FCA, to kick the can another mile or two down the road. And what will the FCA say eventually? No consultation. End of. Or Yeah, okay, we’ll consult. Go away, put together the framework for our consultation then come back and see us again in 6 months. We’ll take away your proposed framework, consider it for 6 months, then come back with whatever changes we think should be made. 6 months after that we can get together and take a fresh look at them. When we’re happy with what you’ve put to us, we’ll think about it for 6 months or so then embark on our consultation which, we anticipate, will probably take about 6 months. When we’ve gathered in all the responses, we’ll go away and think about them all for………………6 months and, after that, we’ll let you know whether we consider there’s anything in them worth taking on board. If not, well, tough titty, it’s a rigged deck and we hold all the cards anyway.

    Constructive meeting my backside ~ wake up from your wet dream Mr Hannant and smell the coffee. You’re living in cloud cuckoo land and the FCA is just stringing you along.

  9. “We don’t want to be seen to say ‘no’, so please hop along and produce a largely irrelevant document so that we can use that [regardless of what it might say] as an excuse to say ‘no’ and blame you.”

    “Oh, OK then…”

  10. Cost = FCA + FOS + FSCS.

    Benefit = ?

    If regulation, past and present, was demonstrably effective – would there be a need for a long stop?

    Or is it the manifest and repeated failures of inept and poorly executed regulation, and the realisation of such failures, that insists on the maintenance of a regime that passes the buck?

    And perhaps before you read that last comment, passing the buck for regulatory failure, as applying solely to IFAs, think perhaps of the costs borne by every individual in the UK for bailing out the Banks as a direct consequence of regulatory failure.


    The NAO put the cost for total peak support at £1,162BN.


    If they are so keen on CBA – let’s see if the FCA can provide those details?

  11. OK, I am somewhat disappointed that even after phoning me yesterday, Tessa has no quoted me at all and unlike Julian Stevens, Tim Harevy drove for 10 hours (5 each way) and I took the day out of the office to meet with the FCA as did Alan Lakey.
    Now, was it a positive meeting……. yes…
    Were we pussies in what we said (what do you think?)
    Do we want an equitable solution that works for the consumer and adviser? Yes
    Does the FCA give the impression of wanting to see how they can rebalance matters, especially in view of the proverbial which is going to hit the fan post April when the pension freedoms come in…. yes, I believe so.
    Will people like me make their lives HELL if they don’t treat this seriously this time? Yes and I suspect in view of the security issues I caused when I arrived, they might decide to visit APFA on neutral ground next time.
    Are they wondering if based on my performance I am mentaly stable? Perhaps, but the point is that even if I am NOT there is little or nothing they can do about it as membership of a professional body is NOT mandatory, so if no-one will issue me with an SPS, if I do everything asked other then play nicely, then I become the FCAs own problem…….
    It is probably time to work to rule, but not being employees, that is very difficult to do, but when their security is such a farce, one can be somewhat awkward by pointing out every single defect which they cannot then ignore as they have probably have to assess it against the existing security threat, then disability discrimination and all the other rules that have been slipped in to the rule book while removing one of the ten commandments (for which I drew a copy of the bible out of my pocket which had not gone through security unlike my bag, leaving my copy of he Quran in the other pocket as I thought it might unsettle them too much when the meeting seemed to be going quite well!) before reading “thouh shalt not bear false witness”an example of what Hector Sants and Walter Merricks decided they were OK with reversing in English Common Law by giving the FOS too much freedom.
    Anyway, it WAS a good meeting and if you were not there to express your views, that was your own fault as no one blocked me from joining the longstop working party at APFA despite my quite idiosyncratic way off putting across an argument that while some of us are willing to compromise, if the FCA fail to deliver on a solution, then not everyone thinks like ME and some may actually ACT.

  12. Oh yes, NONE of the FCA staff present at the meeting were at the FSA when the FSMA 2000 was being drafted or implemented if you check their linked in CVs, other than David Geale, none where even in the FS industry. They are NOT interested in what, why, who or when things were done wrong by their predecessors, all they are focused on (and rightly so) is identifying what the problem is and if we can demonstrate it, what the potential solutions ARE. Even Adam Samual, who does not believe that a Longstop should be applied with regard financial services agrees that the current mess is unfair to consumers as well advisers, just some more than others and as ADVISERs I have seen consumers poorly treated by the fact that the FOS doesn’t match common law either.
    This is NOT an us and them situation.
    It will be if the latest intake of the F-pack don’t sit uo and smell the napalm or change will again be forced upon them as happened with the FSA morphing to FCA, which helped no one except management consultants.
    Lets take our time and get it right, both with APFAs next submission to the FCA and if they accept that a consultation paper specific to consumer rights and responsibilities (but this time NOT telling us the Longstop as a discussion is OUT OF SCOPE), then lets make sure they get 22,000 responses and not just 200 of which half are insurers and quangos and just a handful of advisers) If you don’t speak up in the RIGHT forum (which MM is NOT), then you will not be heard and APFAs feedback will just be viewed as 1/200 i.s. a fraction.
    Show me a solution (I have suggested a few) don’t tell me the problem, I KNOW the problem, but in the meantime we need to show the FCA the problem and it needs to identify why it is a problem for the consumer too..

  13. And where is the FSA’s Cost:Benefit Analysis of its RDR?

    Do as we say, not as we do.

  14. Thinking about it, this is a typical Catch-22 demand from the FCA.

    The natural response is that it’s not a cost issue at all, it’s a moral issue. It would cost NOTHING for the FCA to restore the longstop and, by allowing the intermediary community the same treatment ~ in law ~ as all other professions, would allow retirees to sleep easy at night. What’s so unreasonable about that?

    No, no, no the FCA will say, what we mean is the cost to consumers.

    So APFA will have to come up with a best (and all but impossible) guesstimate as to how many potential stale (i.e. more than 15 years after the alleged event) complaints would be time-barred and therefore how much compensation would not be paid. How many of those stale complaints might be upheld or rejected is completely unknowable. If APFA’s figure is anything other than peanuts, the FCA will say they consider it to constitute an unacceptable (to them) level of consumer detriment. If, on the other hand, APFA comes up with a very small figure, the FCA will say: So what are you worried about?

    Either way, the FCA will have the excuse it wants to reject restoration of a longstop so, for the intermediary community, it’s a GUARANTEED lose lose strategy. It beggars belief than APFA cannot see this or, if it does, that it’s not prepared to admit it and is still bandying about hopelessly misplaced terms such as “constructive”. The FCA is urinating down your back Mr Hannant and laughing as they do it.

  15. Well said, Julian Stevens, you’ve hit the nail right on the head!

  16. @Julian – I think you are going too far sir with your use of language. You are a network AR and the person from your network who attended the meeting was Helen Turner. Speak to her as she is your mouthpiece at APFA, join as an individual member or shut up because I have had enough of your rudeness.
    I took the whole day out of the office on Monday as did Alan Lakey & Tim Harvey as non FCA board members. You could have done the same had you asked Helen Turner, but I suspect you are too much of a coward to say what you right to the FCA’s face.

  17. Spot on Julian – why are we going to cost analysis on this and not on RDR?

    RDR was created to stop mis-selling which the FSA claimed was costing £223m a year

    Direct cost of RDR is £340m pa

    Lets go where the FCA doesn’t want to go. The Limitations Act 1980.

    It hasn’t been repealed – FSMA didn’t absolve the FS Industry from it. It is law.

    The obvious way would be a JV but they are expensive and are prone to the regulator getting hometown decisions. The FCA would attempt to distance itself from FOS and so you would be fighting both bodies separately..

    The problem with Longstop is it is a single issue which the regulator might concede if it thought the rest of the status quo stayed. If the IFA sector is to succeed it must remove a load of issues conceded over the last 15 years

    Having Longstop as part of the agenda of an association willing to fight might be more effective

  18. Julian Stevens 2nd March 2015 at 1:40 pm

    I don’t think telling anyone at the FCA to their face what I think of their stance on the longstop would make the slightest difference and I remain to be convinced that what you and the other attendees said to them at your last meeting with them has either. I believe that the FCA has not the slightest intention of restoring the longstop and is instead just stringing you along in a token display of constructive engagement.

    I will gladly be proved wrong.

    BTW, could you tell us Phil exactly how many non-network intermediary members APFA has? If it’s a pitifully small as I hear, perhaps you could offer some suggestions as to why.

  19. Julian – I have no idea how many members they have as I am not on the board, I just VOLUNTEERED to engage with the FCA over the longstop issue as did Alan Lakey and personally I am at the stage where I am not surprised Neil Liversidge got fed up with you.

  20. I have just phoned Julian and told him over the phone what I think of how he is criticising any attempt by anyone as I cannot post it on MM as it is unprintable. I would have preferred to do it to his FACE, but he is too far away for me to waste my time on him.

  21. @Julian and @Phil. Come on guys don’t get involved in arguing with each other when in all probability you are largely of the same view on the outcome you want to see. You both make great points in different ways, surely the key thing is that a great unfairness needs to be corrected? The tactics and the methods may differ but you both want the same thing.

  22. @ Brian Gannon

    Sensible comment. I do get the impression though reading between the lines, that the comments from both Julian & Phil are borne out of sheer frustration of dealing with an entity which is pretty much above the law and can do what they like. Engaging with them must be akin to trying to knit fog.

  23. @Steve Barrett, yes spot on Steve, however I have corresponded with Phil and he is a great bloke so I just don’t want the strong message to get diluted by disagreements. And I largely agree with most of Julian’s comments over the last year. Basically we all seem to be of the same opinion (with one exception on this blog) that the Long Stop is unfair. Most of us also seem to agree it is a fundamental breach of human rights not to have a long stop in place. And yes our regulators are not liable to any comeback for their actions, making this subject even more emotive.

  24. Nick Pilkington 2nd March 2015 at 4:34 pm

    @Phil Castle Thank you for attending the meetings & if you are going again could I suggest some points to consider in cost/benefit analysis & maybe others can add.
    Lack of Long Stop results in:
    1) Lack of new entrants as who wishes to take unlimited liability on forever.
    2) Lack of advice on any non mainstream products as who would want to take the risk of advising on these with FOS benefit of hindsight.
    3) In particular 2) will include new pensions post April advice.
    4) Increased costs of PI & therefore increased costs to clients.
    Effectively it leads to less advice, more limited advice & increased costs to clients so in all ways clients (as well as ourselves) loose out.

  25. Julian Stevens 2nd March 2015 at 4:42 pm

    I put the phone down on Phil when he started using the F word. Hardly professional.

    Of course we want the same thing ~ fair treatment as is accorded to all other professions. The FCA says it wants to move the FS industry towards becoming a profession and admits that we are making progress yet it refuses to accord us the same rights as any other profession. How can that be right? It’s a matter of principle not cost. Trying to negotiate with an organisation that’s above the law or any sort of accountability to any outside body simply isn’t working. I sincerely believe that this latest request for APFA to concoct a Cost:Benefit Analysis (an impossible task, as Alan Lakey has already opined) is nothing but a calculated and deliberate obfuscatory tactic. My frustration lies in the fact that APFA is deluding itself that negotiation can ever achieve the desired result. It’s a rigged deck and the FCA holds all the cards.

    And what’s the point of my asking Helen Turner for her impression of the last meeting? It’s hardly as if she’s going to contradict anything that Chris Hannant has claimed, regardless of what she may actually think ~ how could she? APFA’s precarious house of cards would come swiftly tumbling down.

    APFA will never countenance a Judicial Review for the simple reason that the network representatives on its board would never back it for fear of reprisals from the FCA.

    So where are all these meetings going? What are they actually achieving?

  26. @Nick – Thanks for that. It was rather annoying to be told I was simply wasting my time attending.
    The pre meeting report sent by APFA to the FCA which is publicly available covered the points you raised and was well reasoned.
    As I said, personally i thought it was a positive meeting and the FCA staff present did take onboard the issues you have highlighted and to some extent want us to make their job easy for them by effectively writing a reason why report for a re balancing of the unbalance caused by removal of the longstop. As I said elsewhere, none of the staff at the FCA in the meeting were there in 2001, so they are dealing with thinks NOW and for the future, they have NO interest in whether what was done before was legally right or wrong or whether it is challangeable under a JR as Julian Stevens seems to want. If he wants to go down teh JR route NOW, then he can do so, but I would rather try to find a workable solution first and I am NO appeaser, I just want to see a working solution before I get in to my dottage and would rather argue for it now than in 30 years time.

  27. @Julian – You are the one who is a member of a Network which is why I keep telling you to speak to your Ntework, especially as you are the IDIOT who will have signed a personal guarantee to the network.

    Despite being a Network member you choose to have a go at directly regulated firms like mine and Neil Liversidge who are at least trying to do SOMETHING and you are NOT paying us a penny for the efforts we make which you say are a waste of time.

    And you wonder why people get annoyed with you?

  28. Julian Stevens 3rd March 2015 at 9:26 am

    Phil ~ As you’ve chosen to mention him, could you tell us what Neil Liversidge’s contribution was to APFA’s last meeting with the FCA on the subject of the longstop?

    Of course I’ve had to sign a personal guarantee to indemnify my network in respect of any liabilities that may (though hopefully won’t) arise after I’ve retired. They’d be stupid not to require me to do so though, over a period of just two years, I’m securing (at a very reasonable price) lifetime run-off cover through their PII scheme, which is certainly worth having.

  29. @Julian go ask Tenet your network provider. You pay them, not Neil or I. I have had enough of your continual sniping.

  30. He wasn’t there, was he?

  31. Anyone else reminded of the poem “Antigonish” by Hughes Mearns?

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