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FSA: Independence bar is not set too high

The bar has not been set too high for independent financial advice, claims FSA head of investment policy Peter Smith.

The regulator published a series of RDR papers this week on independent and restricted advice, distributor-influenced funds and the treatment of legacy assets.

They reiterate that a firm claiming to offer independent advice must provide unbiased and unrestricted advice based on a comprehensive and fair analysis of the relevant market.

Independent advisers must consider a broad range of retail investment products, including structured products and unregulated collective investment schemes.

Asked by Money Marketing if the bar for independence has been set too high, Smith (pictured) said: “I do not think the bar is that high. There is a lot of pragmatism built into the requirements.”

Smith argues the independence requirements after the RDR are there to ensure advisers think about how best to service current and future clients.

Asked how many advisers are likely to stay independent after the RDR, Smith says: “For a large proportion of advisers, they see benefit in the term independent adviser, so they are starting down the route of wanting to be independent. Inevitably, there will be some firms for one reason or another that decide they wish to offer a restricted advice service. We do not know the exact numbers of that yet, that will become clearer as this year goes on.”

Facts & Figures Financial Planners managing director Simon Webster says: “The bar for independence has not moved much. An IFA, by definition, is supposed to offer independent, whole of market advice.”


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There are 23 comments at the moment, we would love to hear your opinion too.

  1. We have never,and will never, be really independant whilst there is an unaccountable and legally immune regime regulating us.

  2. The whole issue of independent/restricted is going to be highly confusing for the consumer.
    Most people understand Independent to mean that the adviser is not tied to a single provider. They do not think that independent means you offer advice on every product under the sun.
    I suspect that the banks have nobled the FSA as by having the new definitions they are not put at a disadvantage over an IFA who although not tied is not giving advice on every product.
    Why the definitions couldn’t stay as they are i.e. Tied & Independent is beyond me,

  3. We lost the support of the public long ago. They couldn’t get to grips with ‘tied’ and ‘independent’ let alone ‘independent’, ‘restricted’ and ‘a selection of carefully selected providers’. This industry has just lost the polt completely and the whole RDR debarcle will do nothing for public clarity or confidence. It should be stopped now.

  4. Re – Hugh Jeego comment

    Hear Hear.

    Re – Nick comment

    Fimbra and Lautro were probably the best formats for regulating our industry that ever was.

    Those who can do, those who can’t regulate.

  5. if the regulator truely wanted the best outcome for consumers they would make restricted direct sales and multi ties a thing of the past and whole of market the only choice, products would soon become fair.

  6. Don’t you just love the smug little smirk on his pasty dish. May not br to high but first step on ladder. Wonder what his back ground is. Paddy Power giving 1/6 on failed broker

  7. How does Peter Smith know really, He or the FSA have never offered any evidence on why this depolarisation will benefit the client.

    All they are doing is poking the compost heap just to make it smell.

    Sorry Peter you say there is a lot of “pragmatisum” built in, and what are they exactly ? and have you evidenced this

    These people are the reason my contept for the FSA has gone way beyond hatred.

  8. Justin Credible 2nd March 2012 at 10:21 am

    Just yet more confusion and obfuscation with a dollop more of consumer borne cost. Forget RDR itself for the moment, what is all this constant regulatory tinkering really acheiving? How realistic is the albeit laudable yet naive striving for a world where everyone receives absolutely perfect advice? Is it even acheivable? If so, at what cost? Is that cost then proportionate to the benefits that might acheived? Not really, I would wager. After all, if we are in such a mess that we need such change as the RDR, what have the last 20 years of regulation acheived, at currently £0.5bn per annum?

  9. Asked by Money Marketing if the bar for independence has been set too high, Smith (pictured) said –

    ‘Anyone got an iced bun? Chocolate eclair? How about a nice bit of sponge?….’

  10. More evidence that the parasite eventually kills the host. They actually seem to have no idea that this is not something that the public wants or understands. What the public does want is there savings to go up and to be safe from the ravages of complete economic disaster overseen by a regulator that things that it is more important to get the title of his/her financial adviser in an acceptable format. Stop rearranging the chairs on the Titanic, stop going into meetings to justify your positions and start dealing with the important issues like the complete lack of faith in the banking system.

  11. Justin Credible 2nd March 2012 at 10:38 am

    @ Nobody Cares – that has always bemused (and amused) me. On one hand they get heated about a few bps here and there or why that plan was discounted or not. Yet they seem oblivious to the fact that I can set up, say, an L&G term assurance for £60pm but if the consumer goes into the Building Society on the High Street it costs them 50% more (or £9,000 of taxed income over 25 yrs) for an identical policy. Now personally I see that as commercial reality but why do they make no attempt to ‘educate’ the consumer on this? Mind you, for years they were happy for the consumer to walk out with not just more expensive insurance but with a lump of worthless single premium PPI as well – although woe betide them if they didn’t bombard the consumer with a myriad of illustrations showing the effect of adding a £300 arrangement fee to a £150k loan???? Haystacks / Straws or rank incompetence at vast expense?

  12. I think its time that the regulators came out of thir Ivory Towers and spoke to members of the public, who are not higher rate tax payers and do not have final salary pension schemes ie the vast majority of Tax Payers.

  13. For what its worth,we know we are well into the law of diminishing returns on regulation – what is needed is to make the transition into a true profession by charter, regulated in a similar way to solicitors (maybe a bad example!).But with the proviso that if you wish to obtain or be advised on financial services in the UK there should only one way to do it.Anything else is a botched up job that will ultimately fail.No amount of rules,or lack of rules can make the current system work.The only part that should be retained is the high level regulation of banks and insurance co’s.

  14. “Pragmatism”?

    More like myopia!

    The regulators can’t see unintended consequences even when they are plain for all to see, that makes you wonder if the consequences are, after all is said and done, intended.

    If the FSA likes the term ‘independent’ so much why was it erased from their website in 2005?

  15. Hacked off of Hackney 2nd March 2012 at 11:50 am

    Has anyone else noticed that all these plonkers wheeled out by the FSA have self satisfied smug expressions on their faces. It`s a sort of “we`re screwing you and there`s nothing you can do about it” look.

  16. Exactly what I thought Hacked off of Hackney

  17. It is interesting to note that the archaic definition of Pragmatic is as follows;
    Adj; Active in an officious or meddlesome way.
    Dogmatic or Dictatorial
    N; A meddler; A busybody.
    Perhaps this explains Smith’s choice of word.

  18. This statement by Peter Smith provokes two distinct thoughts.
    The first is – Has the FSA ever admitting to rethinking any strategy it has proposed? I’m not certain of any other institution that comes closer to thinking itself infallible. I believe that the FSA are now so embedded in Group Think mode, with the perception that the whole world is against them (which could be true) that they cannot under any circumstances take any step backwards since it may give the impression of weakness. That it could give the illusion of listening is not even in their mind set.
    Secondly, does the statement actually make any sense? Independence is about breadth (of operation) not height, so there is an indication that even the FSA are struggling to understand what they require. I have called them lazy thinkers before, and this is a perfect example.
    Look at the mixed metaphor. Independence is contrasted with restricted advice. Think about the absurdity of that statement. If you limit your advice you are not independent. Not independent of what? They may define things that way, but is makes absolutely no intellectual sense. So just how are the public to react to the definitions? Probably in much the same way as they do now – apparently they have no idea about the various differences and don’t give a monkeys.
    But then again neither do the FSA or the FOS. All complaints against advisers are logged as complaints against IFAs. One of the organisations that has sufficient complaints to warrant naming is SJP, a tied agent. Yet the statistics make no reference to tied agents.
    With every utterance from Canary Wharf one has to ask whether there are of this world.

  19. It is unbelievable! The very people that the FSA /FCA are regulating have never been spoken to. RDR is based on a small Australian study. They have never discussed regulation with the advisers or clients here and have just ‘made it all up’ as they have gone along. As I have said before – the operation will be a success (RDR implementation) but the patient will die (Independent Financial Advice for all). Who will take independed advice over MAS? Is this the same as a nationalised IFA system?

  20. …and is the FSA definition of the word ‘independent’ the same as that which applies to the advice/guidance given by MAS?

  21. Trevor Harrington 2nd March 2012 at 5:42 pm

    When a regulatory body, which is in a position of supreme power and responsibility, is told repeatedly by people in receipt of their rules and regulations, that a certain pet project, or substantial parts of that pet project, simply will not work, or will not produce their intended outcome, then one would expect the regulatory body concerned to reconsider their position, review their own dogma and prejudices, and then adjust their actions accordingly.
    Not so with the FSA.
    Despite many years of repeated and constant lobbying from the small IFA , those of us who are actually at the forefront of the part of financial services in the UK which is highly successful and virtually complaint free, that there is absolutely nothing to be gained by their new regulations (RDR if you wish) in
    1) eliminating trail commission and the very method by which most clients receive valuable ongoing advice, along with genuine care and responsibility from their adviser
    2) eliminating ordinary commissions because they failed to control the excesses of that medium of payment, and thereby denying the lesser financial client (majority of the general public any advice at all
    3) creating a renewed round of exams, which we have already taken in the early 1990s (which new entrants have been taking ever since), and thereby forcing thousands of high quality advisers out of the profession
    4) continuing to levy the vast expenses of regulatory fees and compensation schemes at advisers who do not cause the complaints and miss-selling problems that the banks continue to precipitate
    In so doing, they are decimating the IFA profession and denying whole swaths of the public from ever receiving quality financial advice ever again.
    These people will be consigned to the Banks, and their hit and run sales techniques, the very people who were largely responsible for the entire
    a) mass miss-selling of endowments
    b) mass miss-selling of pension transfers
    c) mass miss-selling of precipice bonds
    d) mass miss-selling of payment protection insurance
    e) mass miss-selling of high commission paying insurance bonds
    f) and even the mass miss-selling of the humble locked up term deposit account.
    Those of us who watch the latest effects of the FSA’s crass stupidity and dogma in the form of the Retail Distribution Review (RDR), wonder how this body ever became so completely unaccountable to the electorate, and so completely able to ignore our politicians, and indeed ignore parliament itself.
    Why is this gravy train, with it’s warped intentions, ballooning expenses, and devastating impact on financial services, and the general public in this country, still rolling along?
    We are told that it is scheduled to be destroyed in 2013.
    But, if the FSA is scheduled to be destroyed, and the politicians are so concerned about repeating the same mistakes with the same people, that the new regulator has been specifically told NOT to recruit staff from the dying embers of the FSA, why are we still going to have Hector Sants, and why is the FSA being allowed to persist with their pet mayhem called the RDR?
    Ask David, because I am at a complete loss to explain it.
    There is a new movement called The IFA Centre which is trying to address these issues, with very little time left to do it, and I would recommend that any Adviser who finds empathy in any of the above should seek them out and join them immediately, assuming that they want to save their honourable profession, and the financial well being of their clients.

    Trevor M Harrington
    Managing Director

    Financial Tracking & Advice Ltd
    (Independent Personal Financial Advisers)

  22. Trevor, if you think the IFA centre will have any impact on the leviathan that is the FSA then you are living in another world to the rest of us.
    The FSA is a well oiled machine that is able to ride roughshod over anything in it’s path. Government has created a monster no man can tame.

  23. Why not just have a title of “Responsible or Ethical Adviser”? Regardless of whether one is independent, tied or otherwise it is the irresponsible or unethical practices that are detrimental to everyone. Whether this be in the form of negative consumer confidence or tighter regulations to weed this behavior out. How can an organisation working to targets and bonuses ever be truly in the interests of the consumer? And no I’m not talking about banks, I’m talking about the FSA.

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