The Treasury has quietly dropped a regulatory bomb on advisers. It is one that will see them burdened with extra responsibility and a greater compliance headache, not to mention significantly higher costs. Just what advisers wanted to hear.
Advice firms may not have been following the twists and turns of the new senior managers regime, and, until now, they didn’t have to.
Introduced in the wake of the financial crisis and originally aimed at banks and insurers, the rules are designed to ensure individual accountability when things go wrong at the big firms.
But the Treasury has now announced the regime should be extended to all firms, regardless of size or area of business.
Advice firms will have to check not only whether staff are competent enough to do their job, but also whether they have the integrity to do it. These checks will need to be performed at outset and annually thereafter.
But this is about much more than extra checks. In one fell swoop, the Treasury has shifted the responsibility for ensuring the right people are doing the right jobs from the regulator to firms. On top of that, at an individual level more employees will be on the hook when the FCA finds its rules have been breached.
The Treasury has steamrollered this move without so much as pretending to consult on the reforms. The FCA will consult at some as yet undefined point in the future, but this is purely on the practicalities rather than whether or not to implement.
Of course, all this extra accountability comes at a cost, and as usual it is advice firms footing the bill.
We now have the bizarre situation of firms taking on more regulatory responsibility and being charged for the privilege.
It reminds me of those restaurants where you have a hotplate to cook your own meal and are charged three times the normal bill at the end of it.
The senior managers regime was supposed to be about having a mechanism to go after the Fred Goodwins and Bob Diamonds of this world. It was not about penalising advisers who have already had to jump through all the regulatory hoops put in front of them as part of the RDR.
The FCA has a budget of £479m this year, and has yet to deliver greater accountability.
So how is the average adviser expected to deliver what the regulator couldn’t, with considerably less resources?
Natalie Holt is editor of Money Marketing. Follow her on Twitter: @Natalie_Holt_MM