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FSA rides forth as the new champion of advice

The FSA has at long last woken up to the fact that while it still has some issues to deal with in the IFA sector, most of the problems in the retail financial services sector have been created by the banks.

The retail distribution review interim report must have the banks shaking in their collective credit crunches. Overpriced, over-pushed, badly designed and ill-trusted. If we are fortunate enough, this may be the beginning of the end of bancassurance.

The fallout may be just as significant for all those pseudo-advisers who have long conned their clients into believing that what they were receiving was advice when it was actually poorly disguised product pushing. The end of the multi-tie, thank goodness.

British Bankers’ Association chief executive Angela Knight, was naive enough to claim that “customers have a good idea of what they need and want to get advice and buy their products from a brand they know and trust”.

What absolute nonsense. No one trusts their bank. We all tolerate them and their outrageous hidden charges. The good news is that the FSA has now decided it does not trust the banks either. Who can blame it after the Northern Rock debacle? Surely, this must have been weighing heavy on its mind when it created the interim review.

Those of us who were present at the launch of the RDR in June 2007 remember only too clearly the thinly veiled attack on the IFA sector by speakers from the banking industry.

They clearly saw an opportunity to attempt to control and influence FSA thinking on distribution but I have little doubt that they are feeling less cocky today. If IFAs constituted a football crowd, they would be chanting out loud: “You’re not singing any more.”

Knight is confused. Why would someone who knows what they want request advice? The FSA is spot on. It has recognised the need to unbundle advice from what we call implementation, referred to in the review as sales. A more forward-thinking chief executive might see the opportunity but this one just bleats on about the problems.

She says: “Of course, we are in favour of improved clarity for consumers but this should not come at the expense of consumer access to trusted and cost-effective advice.”

She hasn’t really woken up and smelt the coffee, has she? Banks are not trusted, offering rip-off products and inferior advice offerings. Bye, bye banks, you won’t be missed in the retail financial services sector.

The FSA is now championing true independent, impartial and whole of market advice where the IFA is in control, together with their client, of pricing. It is not the end of commission but it is removing any opaqueness from the process.

Let us hope that vested commercial interest does not influence the regulator. It will not get another chance to create a financial services intermediary sector that is truly customer-centric.

We have a chance now to set the scene for a professional intermediary sector and those unable to cope with the change will be heading post haste to the exit doors.

Which IFA in their right mind would not subscribe to an advice regime that:

  • Is clearly seen to be operating in the best interests of its clients.

  • Can provide financial planning or focused advice.

  • Does not have to be told by product providers how it is going to get paid.

  • Is whole of market when it does recommend financial products andl Is able to demonstrate quality through higher professional standards.

    If those five points do not constitute a pretty powerful offering, then we might as well all join the banks and go home.

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