Having read a good deal of the of debate on CP121, it is beginning to emerge that CP121 is very much less a consultation paper than a declaration of intent.
The one thing emerging above all others is that the FSA is emphatically not an open-minded or listening regulator (despite its claims to be).
It has its own particular agenda for change (flimsily disguised as “reform”) and uses all manner of disingenuity to cast aside any argument that its plans, when implemented, will muddy the waters for consumers and play into the hands of the banks and building societies.
The FSA seems utterly determined not to accept, much less understand, the industry's established thinking on the clarity for consumers of polarisation or the practicality and desirability of giving consumers a choice of how to pay for the advice they receive.
I am all in favour of those who purport to be advisers being encouraged to give advice, rather than simply justifying sales of products.
This is the direction in which I am making every reasonable effort to steer our particular practice. Our modus operandi has, over the past year, evolved towards charging a combination of up-front fees (for our initial report and recommendations) and commission (often at discounted rates) in respect of whatever transactions may result. Both are fully disclosed to our clients before they proceed.
The commission element is variable, of course, as the client may change his mind as to just how much he wishes to spend on or invest in the product. This will rather upset the workability of commission within a defined level of remuneration, will it not?
Why, if the consumer is happy with such a system, does the FSA have to meddle with it? It will not say, at least not in terms that any reasonable person can understand.
Shortly after taking office, Alastair Darling said, “If it is not broken then we will not be aiming to try to fix it.” Polarisation does not need fixing.
Less than a year ago he declared, “Polarisation is past its sell-by date”. Polarisation never had a sell-by date – it is as right now as it ever was and does not need people like Mr Darling tearing it all down.
As for David Severn, here we have a grey, humourless and Machiavellian bureaucrat who could not give a straight answer to a straight question if his life depended on it.
Presently, my thinking is that we shall probably take the AFA route but continue to describe ourselves to our clients in everything but our terms of business document as independent.
If a client should ask why the word independent no longer appears in any of our literature, we shall simply say that it is because a certain group of narrow-minded and bigoted people controlling the industry have decreed that the term shall be used no more by anyone other than those who charge fees, albeit that commission may form (a quite possibly variable) part of an overall defined-payment structure.
The cost to IFAs of dealing with one of these new defined-payment structures may also need to be varied to meet the additional, yet unpredictable, costs of resolving the more-or-less inevitable delays and errors which occur in getting just about any transaction with most life offices to a satisfactory conclusion.
Like so many other things, this is something that the FSA does not seem to have thought about. Yet the FSA, in its omnipotence, remains perfectly free to ratchet up its levies by however much it pleases whenever it considers it necessary.
Is this democracy or what? Do as we say, not as we do (especially in matters of honesty and competence).
WDS Independent Financial Advisers,Bristol