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Ken Davy condemns “ridiculous” annual professional statement


SimplyBiz chairman Ken Davy says the RDR requirement for advisers to obtain a statement of professional standing every year is “ridiculous”.

Davy says the requirement is an example of “top-heavy” regulation. He says: “As it stands, the statement will have to be obtained every year. I would not mind every 10 years, possibly every five, but every single year is frankly ridiculous. It is an example of a top-heavy regulatory structure that should have the axe taken to it.”

Davy also hits out at the FSA’s definition of independent advice, claiming the requirement for advisers to consider the whole investment market pushes them towards risky product areas.

He says: “It is ridiculous. The FSA is driving advisers towards considering unregulated investments and other risky product areas. If someone is classed as independent, they are, under the law of agency, acting for their client. That is a straightforward definition.

“It is nonsensical of the FSA to try to redefine the English language. It is moving away from reality and making regulation far more laborious for advisers at a time when we need more, not fewer, of them.”

Thameside Wealth Management director Tom Kean says: “It is not the case that advisers will have to recommend all types of investments to remain independent. Advisers will simply have to research all types of investments and state if there are any they do not think are suitable for their clients.”


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There are 27 comments at the moment, we would love to hear your opinion too.

  1. As always, Ken attaches a realistic approach to matters. The ‘Think Tank’ at the FSA needs to start listening to people like Ken before they totally decimate this industry.

    Oh! and by the way, can someone place a gagging order on that guy Hoban at the Treasury. Although he is another story.

  2. Prison could be looming as the more the FSA make rules, the more it conflicts with all the law that has gone before the FSA and sooner or later decisions to stand up and be counted will have to be made.

  3. I agree with Ken on the matter of the SPS. Annually is rediculous. Even if an adviser fails (for whatever reason) to obtain one, he/she can still advice so what is the point? It only needs to be shown to the client if they ask to see it, how many of them will actually ask? How many of them will still continue to deal with their adviser even if he or she tells them that they do not have an SPS THIS YEAR because I didn’t do enough CPD? Who will really care?

  4. Ken, is it time for you to retire? You can condemn until you are blue in the face, there is nothing you can do about anything.

  5. I can just see the new “Reasons Why” letters. They will need to have sections on investing in Fine Wine, Art-works (and the advantages of Paintings, Scuplture and pro’s and con’s of Prints and Photography as collectors items). Classic Cars, Jewlery. All manner of fringe activities such as Land Banking and Carbon Options. Perhaps even squeezing in something on Equities, Unitised Trusts – and maybe even Corporate and Government Bonds. Who is going to pay for the extra research on extra “Investment Options” which are probably going to be unsiutable by their verry manner. Client, of course. Will that usless research and extra cost be of any benefit to the client ? . . . . having said that, I still think my 1960’s soft-top E-Type was a far better investment than the same amount of money put into an ISA at the time !

  6. @ tom Kean:
    Do you really think your firm will research EVERY type of asset worldwide, and find clients willing to pay for that time?? My guess is that there are probably hundreds of new assets/funds/instruments arising somewhere in the world every week. Unless your advice charge is about the size of a house then you wont be able to do this. To pretend you will is misleading clients. Clients understand that you are independent if youre not tied. Its so simple. And they are happy for you to limit your research (and hence your advice charge!!) to a sufficiently wide range of particular categories of assets in the first instance, which usually produces a totally suitable solution.
    This other stuff is just overcomplicated, out of touch, regulatory junk.
    And can we not find out which specific individuals at the FSA come up with these rules – someone ought to be able to be held to account, or conversely have the courage of their convictions and come out stand up and say I decided this and heres why, and engage in discussion and be prepared to move if they lose the argument – we might even get better rules that actually work.

  7. The ISO22222 needs to be renewed annually, and at some cost. I have queried the value of this too, especially as no client asks to see it.

  8. and whats it going to cost? who is going to pay for it?

    and btw dictatorships are failing in case you didnt notice, FSA might also want to look down out of the window on your very own street, assuming that is you can see through the clouds.

  9. there are other games afoot 21st October 2011 at 9:38 am

    there may be a hidden desire within Simply Biz’s motives to promote their own funds in their drive for clarity

  10. Just another cost that eventually passes on to the client for no discernible benefit – what’s new?

    For the hundreds of millions (billions?) of pounds that the FSA has cost – what benefit has the investing public actually received? For the reams of reports and other information dished out – how much better do clients understand?

  11. I didn’t think anyone still did ISOs.

  12. @ Richard Wilson
    Am interested to see you think there is a ‘think tank’ at the FSA.
    To be honest, the word ‘think’ should be replaced with ‘septic’ as that more accurately reflects the ordure that constantly seeps away from Canary towers.

  13. They’ll look back in 30 years and asked why this was allowed to happen and they’ll wring their hands and say; ‘never again’. This industry has been through the mill since 1984 and we haven’t seen the half of it yet. How many advisers will be left advising by 2015, and how will the average man or woman in the street get access to any financial advice is something the FSA should be looking at but no we hurtle head-long into the abyss because someone has to justify their position and salary. Do our GP’s and medical professionals have to have a certificate of professional standing every year I wonder? And, they bury their mistakes of course.

  14. I see no problem with considering the “whole” market of investments and if any adviser who expects to be paid fees, is going to function in post RDR world, they will have to adapt the basis of their advice to reflect that, my take on this is that a simple phrase as below will kick this particular requirement into touch very soon into the process of advising a client within the body of CS letters

    “Mr Client, as you know I am a whole of market IFA which in effect obliges me to know about different types of investments, not just packaged products in the financial services sector, but from our discussions, it is clear that the ATR and Risk Tolerance questions you have answered, indicate that your preference for suitable investment vehicles is heavily weighted towards ……..etc etc etc. and you do not need advice on investments which do not match these criteria.”

    Job Done, Clickety Click!

    As for Ken Davy’s view of the need for an annual SPR, if that is what the rules state is needed then we just need a system which will produce it.

    As for RDR itself, we are, as a sector doomed to reduce our numbers significantly and IFA services
    will only be available for the very well off in future, maybe the answer is to go “restricted ” and ditch the IFA title altogether, after all that is the intention of RDR, to take out those annoying and irritating IFAs who have caused it so many problems in the past and concentrate the distribution of packaged investment products into the safe pairs of hands that the banks offer the consumer (lol if you want to, that is the whole intention of RDR)

    Who called me cynical/

    Bah!! Humbug!!

  15. I guess I should remain anonymous! 21st October 2011 at 10:22 am

    One of the problems with all this is that when judging past advice inevitably hindsight becomes a factor. It reminds of the time that I was asked by a poor former Boots employee in 1999 what to do with the few company shares they held. I thought for a moment and observed that as a spiritual person perhaps they should take note of Nostrodamus’ and others predications that the world was due to end in 2000. A year later (when I had completely forgot about that “advice”) the client thanked me profusely, becasue they had cashed in the shares and they had subsequently dropped a lot in value. It the FSA had found about that at the time, they would surely have wanted to lock me up!

  16. I see there is some anonomous muppet earlier suggesting that Ken should consider retirement. In truth it is the anonomus contributor who should get out.

    Ken has consistently demonstrated that he understands the market and that he knows his customer both within the industry and amongst the wider public. He is one of the few people in financial services who has the scale and credibility to argue in favour of the small independent.

    On these grounds alone he should be heard. But he is also 100% right.

  17. Neil F Liversidge 21st October 2011 at 11:06 am

    Ken hits the nail on the head again. It is indeed more mindless and expensive bureaucratic window-dressing. It calls to mind the FSA’s annual requirement on me to sign a piece of paper saying that I am fit and proper which I must then file away here in my office until the time the following year when I must do it again. I don’t know who are the biggest idiots, the people who think up these rules or us for putting up with them. Well done Simon Webster for your comment above; never take any notice of the defeatists. Join with us in AIFA now and fight for a change for the better.

  18. @ Ned
    “….you do not need advice on investments which do not match these criteria”
    Im sure youre right that it will come down to using carefully crafted phrases to cover ourselves (what a shame that it comes to that though as usual) but re your phrase above, how could you know they dont meet the specificed criteria unles youve found them and scrutinised them?
    Isnt that the whole problem with the application of the FSAs uber theoretical approach to this

  19. Interesting array of comments above. Re the IFA definition;researching all products debate etc –

    Let’s look on the bright side. In light of the Mifid draft which will now (allegedly) only ban IFAs from being paid commission, how many IFAs, post RDR, will want to be classified as IFA (with all the resarch; knowledge; product awareness issues)?

    Does the Mifid report mean that restricted advice advisers ie/ not IFA, can receive commission payments after RDR? Someone please tell me. If so, the FSA will have shot themselves in the foot (at our great expense) because I don’t think people would place the same importance on their ‘Independant’ tag for too long.

    Funny old world, ain’t it?

  20. Thanks Ken for speaking out for us as usual. It is appreciated. Annual statements will be as useful as HIPS were for the property market, but of course, there will be no escape and the costs will have to be passed to the clients. It may help other advisers to compile a list of the regulatory costs we now face and to have this available when meeting clients. I find that most clients are amazed when I take them through what we need to do and the resulting costs just to be allowed to practice. It helps them understand why our charges are robust and that we are not buying Ferraris with their fees.

  21. I agree with Ken. The SPS is complete rubbish and the FSA have broken a committment to NOT make membership of a Professional Body Mandatory (compulsion of belief is not BELIEF in a system) Membership is likely to be mandatory by default as I don’t think you”l find any accredited body has confirmed they will issue them without membership…
    I think there could be a massive backlash against these Draconian rules in January 2013 and it may take some advisers actually standing on principle to make a point.
    My predecessor firm used to carry “Ethical” in it’s title, but I left for several reasons, one of which included the fact that my colleqgues were rather surprised when I explained to tjem that despit what they thought I was not a practicing Christian. As my Jewish friend have pointed out to me and I had to point out to these Ethical advisers, Christians do not have a monopoly on ethics and now it is important to point out that the FSA certianly do NOT have a monopoly on our thoughst even if they dictate and then enforce.
    I am pretty much decided that post December 2012, the morally correct way forwad for me is to describe myself as Restricted (not tied) and then explain the nature of that restriction to my clients. If they wish me to work within thast restriction, then they get restricted advice, if they wish me to work outside that restriction I willd ecided if it breaches my ethcis or not and explain to them eitehr why I will, or will not take them on as a client.
    I amn adviser charging already and will not revert to commission and I have increased my capital adequacy to meet the originally planned changes. Now they have been delayed, I will invest in my business ratehr than hoard the cash which would otehrwise be requried.

  22. I do think that it is unrealistic (and possibly untrue) for any adviser to claim that s/he has reviewed every available investment and weeded out the “unsuitable” ones. Don’t forget that the FSA claims not to have the resources to review every investment,so I cannot think that any firm could achieve what the FSA claims that it cannot do. And I do agree with Ken Davy that an an adviser that acts on behalf of a client should be treated as an independent adviser.

  23. Annual SPS renewal, and associated CPD, will surely help stave off need for another RDR, and rush to gap fill in future.
    Some on here talk of clients ‘asking to see it’ – it should be worn as a badge of pride, like Gas Safe reg etc… as it shows all you are being responsible to them by maintaining knowledge levels/

  24. Gas Safe is NOT a good example. I can prove that they and the HSE have knowledge that Gas Safe engineers and the directors of Plumbing firms have not fully addressed the issue of hidden flue and in about 1-2 years time the proverbial will hit the fan when people’s boilers have to be disconnected.

  25. I read Ken Davy’s article MM profile with amusement. Mr Davy believes that there will be no IFA Networks after 2012! Well our network of nearly 600 IFAs has grown by 20% this year and things have never been better! IFAs love it because: Networks give IFAs a licence to trade; IFAs don’t get hounded by FSA communiqués and workshops and visits; there are no capital adequacy calculations for network IFAs; we are all longing to be told what to do and how to do it in compliance – and that is precisely the service that networks can offer; no network member ever got fined or banned; and Hybrid-Networks don’t control adviser commission at all.
    2/3rds of all IFAs work inside networks and the network model works in almost every other service industry – and is especially strong in the accountancy world. It will take more than the RDR to kill off the network franchise idea. In fact you should be asking why any IFA without a full time compliance officer would want to get a direct licence from the FSA – the risk is sky-high.

  26. Its because of people like Ken Davy that our Industry is being regulated now. Some people have a short memory!!!!
    How many other faces can you have Ken?

  27. To There are other games afoot.

    Simplybiz do not have their own funds.

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