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Is the FSA planning a Capital Adequacy Poll Tax on IFAs?

I would love to know exactly what thought process a regulator goes through when it decides to host a conference to debate RDR version three but leaves a really nasty surprise for a prudential rules paper later in the week.

This hardly is an embrace of openness. More like the spinning tricks learned from the FSA’s lords, masters and creators – New Labour. Instead of openness, those advisers who stumped up their £300 were treated to a big debate without a paper to actually know what was really going on. They should demand their money back.

So at risk of debating something that doesn’t exist yet, the FSA is, according to Aifa chief Chris Cummings, planning a poll tax on advisers. It will call it capital adequacy but it may be a thumping quarter of annual turnover for some firms.

Now bear with me. I don’t know this for sure, but according to everyone, except the FSA’s own spin doctors who don’t seem to know, the paper is due tomorrow.

It also means that the RDR goes from acceptable to unworkable in one fell capital adequacy swoop.

Clearly there is a lot of other bunk in the paper. There is a ridiculous fudge on names of advisers, around the various sales channels – in effect the multi-ties may have wriggled off the disclosure hook. The simplicity of the sales and advice divide may be abandoned though IFAs’ tied rivals will face exams and some sort of disclosure regime separating out the advice cost.

Personally I would argue that their commission structure and failure to switch trail when a client moves to an IFA means that say a St James’s Place adviser isn’t even a multi-tie but a tie with some pretty good fund links, though I am quite prepared to stand corrected by them. But part of me always felt that perhaps IFAs could do the damage themselves by pointing out the differences between independence and sales without regulatory help.

But if the capital adequacy move is true then the independence – in the general sense – of small and medium sized firms outside of networks is in peril.

That means the playing field has been tilted back in favour of the real villains of the piece, the banks. These are the people who couldn’t sell debt responsibly and are at least in part responsible for bringing the British economy to its knees. Good work.

How about this for a regulatory rule of thumb – if the banks and indeed their formidable spokeswoman Angela Knight are happy then you’ve probably got it wrong.

The regulator can waffle on about IFAs needing more capital – Money Marketing actually conceded that argument up to a point, and thought a doubling while unpleasant was possible – but this sounds very grim for those outside networks.

Indeed if this is a clumsy way to reverse the migration from network to directly authorised then why not consider direct action rather than trying to effect some outcome with a regulatory tool not designed for that purpose.

If the change is of the order that Chris Cummings is suggesting, then we once again have a situation where the regulator is planning to crush some IFAs out of existence.

I will save the detailed arguments until we see what justification they come up with tomorrow.

As for anyone who might suggest I am arguing prematurely all I can say is that the FSA’s methods would hardly give anyone confidence about their motives.

One last point on the standards board. We knew it was coming but it should not become a massive burden on advisers. It is up to those with ambitions to sit on the board to show that it will not simply be double regulation. Maintaining standards is one thing, bossing people around to no purpose, another.

Oh yes, and if I am wrong, I take back all I have said.

Ah, I just got a very bad case of déjà vu. Oh dear. Here we go again.


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