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].”