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FAMR panel defends inclusion of just one adviser

Money Marketing Interactive 2016

The chair of the Financial Advice Market Review expert panel has defended the membership of the group saying adviser views were “vociferously argued” despite counting for just one fifth of representation.

Speaking as part of a FAMR panel discussion at Money Marketing Interactive, FAMR expert panel chair Nick Prettejohn responded to criticism that there was just one adviser on the 15-person panel.

Prettejohn, who is also Scottish Widows chair, said: “There is a fundamental misconception about this, which is the distinction between advice and adviser. What we were not trying to do is reflect the important views of advisers but the whole market for financial advice and guidance on the one hand and the consumer view on the other.

“In order to do that we had to be able to accommodate the views of different consumer organisations, different types of product providers, and advisers. The views of the adviser community were extremely vociferously argued around that table by at least three people on the panel. I don’t think the panel suffered from any lack of understanding of where advisers are coming from.”

Those on the panel with an adviser background were former IFA Centre founder Gill Cardy, now insight consultant at Defaqto, adviser Robin Keyte, and Old Mutual Wealth chief distribution officer, formerly Intrinsic chief executive, Richard Freeman.

Also speaking on the panel, Apfa director general Chris Hannant said the FAMR expert panel was not the only outlet for advisers to voice their opinion on the review.

The trade body spoke with Government ministers, as well as acting FCA chief executive Tracey McDermott about the consultation.

Hannant added: “We encouraged all of our members to engage. The number of responses dwarfed what the FCA usually gets.”

The FCA is expected to shortly announce the formation of a FAMR working group which will also include members of the FCA consumer, practitioner and smaller business practitioner panels.

The Financial Services Compensation Scheme funding review was also discussed by the conference panel with FSCS chief executive Mark Neale commenting that the FSCS is as “much a part of the solution as it is part of the problem”.

Neale added: “FAMR offered some avenues that are absolutely worth exploring. Can we deal with volatility by FSCS borrowing to deal with the peaks and troughs? We should look at that though there will be a trade-off between costs and the lessening of volatility. Could we deal with volatility by spreading our costs across broader, wider pools rather than the industry sectors by which the costs are spread at the moment.”

The FSCS is in favour of looking into a risk-based levy and Neale urged advisers to help the organisation find “objective measures” it can incorporate into its funding model.

Elsewhere, FCA FAMR secretariat head Ed Smith backed the review’s recommendations saying they it had a “real prospect” of addressing the advice gap.

Smith said: “I am sceptical of anyone who comes forward and says there is a big headline initiative that will solve the problem. We have a regulatory framework that is there. It is making that framework work for people, that they understand it and that they feel confident using it to provide advice and guidance.”

Neale also hit out at the professional indemnity insurance market.

Neale criticised the way the current PI model for advisers works in practice.

He said: “PI cover is an interesting issue and one we have flagged repeatedly because many of the firms that come to us do so because their professional indemnity insurance is not fit for purpose. I would be up for understanding how PI insurers make their own judgements about the premium they charge advisers.”

The Financial Advice Market Review recommended the FCA carry out a review of the availability of PI cover for smaller advice firms once it has completed its review into the FSCS funding model, which is underway.

Neale added: “A bigger problem is the lack of fitness for purpose of many PI policies so firms can’t absorb the liabilities that come to them. That tips them into insolvency and they become a charge on us and all of you [advisers].”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. We are still dealing with moving deck chairs on the Titanic. We need to reduce the costs falling on FSCS. This means only covering products that are regulated, using a product levy which takes account of high risk products and charges accordingly and leave the rest of the low risk Advisers and Clients with massively reduced costs. Let’s stop pointing fingers at PI Insurers etc. The FCA and FSCS can deal with the above if they had the motivation to deal with it. No more straw men.

  2. One of the problems that has dogged financial services since 1988 is this insistence that theory trumps practice.

    How many products have been released which, despite the enthusiasm of the provider, have failed to resonate with the public and advisers?

    How many regulatory initiatives have ended up being buried or swept away under the tide of this years new idea?

    Politicians and regulators (almost the same thing, really) seek to persuade us that their idea of nirvana will work and will be acceptable to the public despite a history of being wrong and wasting £bns of pounds of OPM. Like politicians, when reality bites and their hare-brained schemes fail they move on to Ernst & Young or some other business that is happy to snaffle them up for a while.

    Meanwhile, the public and advisers . . .

  3. “What we were not trying to do is reflect the important views of advisers but the whole market for financial advice and guidance on the one hand and the consumer view on the other.”

    Plain English translation:

    We want to ensure that the views of the moribund life offices have pre-eminence as we are sinking and need all the leverage we can get.

    FAMR = FINANCIAL ADVICE Market Review. And who dispenses advice (as opposed to flogging products)? Why blow me – financial advisers. Now isn’t that strange!

  4. “What we were not trying to do is reflect the important views of advisers but the whole market for financial advice and guidance on the one hand and the consumer view on the other.”

    Plain English translation:

    We want to ensure that the views of the moribund life offices have pre-eminence as we are sinking and need all the leverage we can get.

    FAMR = FINANCIAL ADVICE Market Review. And who dispenses advice (as opposed to flogging products)? Why blow me – financial advisers. Now isn’t that strange!

  5. Hmmm sounds like asking 15 medical practicianers to undertake brain surgery with only one brain surgeon actually there. When it comes to advice and advising consumers heads of major corporate bodies even of they have been advisers in the past, have very little understanding of the issues faced today. It would be like asking me about cashiering in a bank, something I did some 35 years ago, at that time I fully understood the process, the dangers and the likely frauds and pit falls. Today, I would not have a clue.

  6. Trevor Harrington 22nd June 2016 at 8:46 pm

    This response is absolute rubbish.

    It is a very simple issue which they are, once again, completely failing to address ….

    No matter whose figures you look at, small IFA practices in this country are producing well over half of all retail financial services business with the general public.

    They have given us ONE seat out of FIFTEEN (assuming that you believe the one seat concerned is in fact an IFA with recent practical experience).

    They have two very simple choices. They can put this simple mathematical error right immediately, or they will simply incur our collective abject derision, as indeed they always have done in the past when they try to pretend that they have some sort of fair representation across our profession.

    Bearing in mind our profession is all about facts and figures, it is stunningly disappointing that they still think that they can get away with this sort of nepotistic selection of their “mates”, presumably thinking that they can do so without comment or condemnation from us mathematicians.

    Direct appeal to Garry Heath (Libertatem) – get on with the job old boy, or consign yourself to oblivion !

  7. I find it quite ironic that today, we are all voting, at least in part, on the merit or otherwise of allowing a group of unelected bureaucrats in Brussels to control our laws.

    Meanwhile back in Financial Land, we have the same mentality in place, only this august regulator was imposed on us by ‘our own’ UK government. We can’t blame Europe for that.

    Why would the FCA listen to us and our moaning bleating’s and dissatisfactions about this or quite frankly any other issue? Essentially we are the enemy or with appropriate spin the very reason for their existence. In the 30 years of regulation you may think that the successive regulators may have achieved enough in culture, practice and systems to work themselves out of a job. The truth is anything but that, as we all know.

    The jobs for the boys system continues and the nuisance factor of little Financial Advisers is just that, an irritant.

    They are, by and large, untouchable. Remember the televised TSC meetings before Sants received his knighthood. They are unaccountable and don’t care what we think. Why should they. They make the rules and that is that.

    Having a balanced panel of manufacturers and advisers is clearly just stupid when it comes to a Financial ADVICE Market Review. What the hell could we offer such a panel? It would be like the police setting up a crime commission with a load of ex-cons.

    Unbelievable is the only word I can reasonably give to this and much of the excessive and unworkable regulation that is dumped on us for ‘their’ benefit. And we have to pay them for the privilege. Time for another sedative me’s thinks!

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