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IFP calls for new regulatory definitions for advice

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The Institute of Financial Planning has called for new regulatory definitions that differentiate firms offering wealth management, financial planning and financial advice services.

Writing in Money Marketing this week, IFP chief executive Nick Cann says the recent Financial Services Compensation Scheme levies are “galling” and “unfair” as advisers are paying to cover the failures of firms that operate in different sections of the market. He says: “Part of my thinking about a solution comes back to greater clarity on defining the roles individuals and firms perform for their clients.”

He noted at a recent meeting of wealth managers that they debated how they were differ- ent to other advisers and should be treated differently. Cann says: “If there is a desire to properly define wealth management as a category that could sit alongside a properly defined financial planner and financial adviser, firms could potentially elect what service they provide for their clients and therefore which segments they are sitting in.”

Aifa policy director Chris Hannant says advisers had to pay for the collapse of Keydata because a firm that should be seen as a provider was placed in the investment intermediary FSCS sub-class.

He says: “You can dream up all these different definitions about who pays but if they are not app-lied, it is pointless. IFAs should distinguish themselves by what service they provide but I am not sure it is something we want the regulator to be involved in.”

Chartered Insurance Institute director of policy and public affairs David Thomson says: “The problem with definitions is, where do you draw the line? You could have a firm that is ext-remely good but is working in risky products as that is their specialisation. What the IFP is sugg- esting is laudable but it does create a new set of problems.”

The FSA declined to comment.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. Whilst your intentions are laudable, as alway the conseqential effect has once again been ignored. Such a change would introduce even more confusion for the consumer. We’ve seen Independent, tied, multitied, now we have independent and restricted, introducing yet another layer of choice for the consumer would defeat most of what RDR originally set out to achieve and that was for consumers to know what they were getting for their money. so please don’t follow this route as it will just introduce the opportunity for yet more chance of smoke and mirror regulation.

  2. The FSMA 2000 definition of advice is simple, straightforward and the courts can apply it.
    Meddling with the definition is a recipe for more spurious claims against us.

    As someone who is considering signing up for membership of the IFP, I’d rather my subs went on paying policymakers to use their time pursuing matters that really mean something to me. THE LONGSTOP.

  3. Nick is right to bring attention to this subject. Whilst the Longstop issue is at least as important as a the categorisation issue they are not mutually exclusive. Ensuring the appropriate sectors are correctly categorised is a key issue for us all because of the growing dissatisfaction over the continual requirement to find, at short notice, special levies to the FSCS for firms which appear to have had little meaningful supervision, even if whistles were blowing across the land about their activities. The polluters appear to rarely pay and that plays havoc with capital adequacy and reinvestment into client services. I therefore support what Nick is doing by raising the subject for serious discussion.

  4. “Advice” – Dictionary definition – Opinion from one not immediately concerned as to what could or should be done in a given situation

    “Adviser” – Dictionary definition – A person who offers advice, especially in an official or professional capacity.

    Why do clever people like Nick Cann agonise over what is clear to 99.9% of the population.

    If you are an adviser, by definition if you recommend something to a client or a course of action they should take (ie – fund switch, product switch, product purchase, etc) then you have proferred advice.

    Applying common sense to such issues avoids confusion

    Simples!

  5. More rules. More confusion. More fees. Less time. Less income. Less benefit to the public.

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