If you are an IFA reading this article, I congratulate you on your survival skills. You have survived through a period in which there has been a systematic attempt to destroy your income base. You have been under severe pressure, both financially and mentally.
Bearing in mind these factors, you would think that IFAs would be united in their approach to the various problems that confront them. If only that were true. It pains me to say that, faced with such threats, IFAs are completely divided.
An example of this is the different approaches to dealing with the FSA advocated by Jon Maguire of Justice for IFAs and Paul Smee of Aifa.
Gentleman, you are both right and you are both wrong. Maguire and Smee should be working together and not against each other if they have our best interests at heart.
I agree with Maguire's point about the lack of a clear definition as to what constitutes misselling. The FSA is actively vague about its definition of misselling and has been completely arbitrary in its actions. It has led to a situation where it is impossible for some IFAs to get PI cover. One IFA told me that his firm's PI cover has increased fivefold without making a claim. Not many businesses can survive in this atmosphere.
Our PI insurers have no idea of the risk they are taking on board when covering an IFA and have had to assume the worst possible risk and increase premiums accordingly. I do not blame them for this – it is clearly the fault of the FSA and the ambiguous way in which it has acted. It needs to be held to account and provide the whole industry with a clear definition of misselling.
Our current representatives have not been able to resolve this and the networks do not seem to care so what do we do? Talk – while some IFAs go out of business.
This situation cannot continue. The FSA needs to be challenged through a judicial process in order that it may provide some clear and concise definitions that we all can recognise and work to.
I commend Maguire for this. However, he is wrong if he thinks this is the only approach that should be used with the FSA. We should remain in dialogue with the regulator. We must use the press and clients to put our case. We have been dreadful at making our case and using the press and have totally failed to make our clients understand what they are in danger of losing.
Smee was completely right in the way he put our case for CP121. He has achieved a remarkable result and I congratulate him for this. However, the approach in the past to the FSA's actions has not been good. The FSA has made our industry the most regulated industry I can think of. The result is less choice for consumers and greater cost for practitioners. We have failed to engage the regulator in any constructive discussion and, therefore, the regulator tends to listen to the consumer first and to the industry last. The Consumers' Association seems to have a better working relationship and influence with the FSA than IFAs. Why?
I believe that Smee is wrong when he thinks that legal action will serve no purpose and will just be a waste of money. If that were so, then there would be no equalisation of pension rights.
Taking legal action will provide a clear and legal definition for misselling which we do not have at the moment. We need to continue talking to the FSA but stop being a lap dog. We must stop being apologetic for the sins of the past and be judged on our actions now. It is not right that we are judged on the standards of business today on contracts written in the past and it is not right that the regulator should be allowed to continue to take that view without challenge.
I therefore implore Maguire and Smee to join together to get justice for IFAs. You need to engage in a dialogue with each other, the networks, the CA and the FSA so that future regulation will be practical and realistic, providing protection for all of us. Otherwise we will all lose out.
John Winful is a partner at Winful Associates