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Neil Liversidge: FCA needs to level the disclosure playing field

There are two cafes here in Sagar Street, Castleford, where we have our office, The Blue Cup and Maureen’s.

Both have been going since the 1960s and both allowed smoking until the introduction of the smoking ban.

Before the ban I asked both owners why they allowed it when most customers, me especially, didn’t enjoy mixed mouthfuls of smoke and food. Both worried that if they banned it first their smoker customers would go to the other. The smoking ban levelled the playing field. Now we all eat smoke free and neither business has lost out to the other.

The FCA recently completed its suitability review. It alleges, in relation to fees, that “41.7 per cent of the sector provides unacceptable levels of disclosure.”

Presumably that 41.7 per cent didn’t include the FCA’s sweetheart St James’ Place whose directors, according to Tony Mudd, sat down with the FSA a year before RDR to agree how its ‘unique’ pricing could work.

It obviously works for them as I still come across clients who think SJP is independent and that it gives free advice. If Andrew Bailey wants to come to Castleford to agree our unique structure I’ll make sure we have the kettle on.

Marking our homework

We were not amongst the firms asked to submit files for review. Having developed an at-retirement process which I think is pretty good however, I wanted the regulator’s take on it.

An FCA contact of mine kindly agreed I could submit a file. I do not have a problem engaging with the FCA. I’ve always found its people intelligent, fair, genuine, professional and helpful. Even when I disagree with them.

After some clarification our advice was deemed suitable but our disclosure unacceptable. That despite us giving every client a firm all-in price in advance before they commit to anything. So we are apparently part of the 41.7 per cent

Do I feel bad about that? Not in the slightest. Sure, I’ll tweak our documents to comply, but if anyone seriously thinks we in any way mislead clients or disguise what we charge then he or she is barking.

Breaking down the numbers

We met the client in the specimen case on 14 June last year. It was complex, involving different pension types with funds totalling £167,000. We priced the job at £1200 and issued a client agreement by post 21 June which the client agreed 13 September. We got him benefits far in excess of his expectations and he was delighted. Not the FCA.

Our client agreement separates advice and implementation costs and is fully itemised. The FCA says it does not make clear the fact that we charge for implementation. I completely disagree and we’ll continue to argue about it, but this could all be solved by a level playing field on disclosure standards – method, format and timing – covering all the players in the market.

A smoke-and-mirrors ban to work like the café smoking ban, covering vertically integrated firms and comparison sites along with advisers. And please, no more sweetheart deals that give some an unfair advantage.

Has this put me off engaging with the FCA? Not at all. Some will sneer and say it serves me right for sticking my head in the lion’s mouth but hey, I’m a biker and used to living dangerously.


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Boy, does this strike a chord with us Nigel!
    The problem we have is specific disclosure as for many IFAs you simply cannot get this right unless you operate a percentage fee model. Is that what the FCA want to drive us towards? It is very odd that a model which involves cross subsidy, contingent charging is easier to comply with the specific disclosure rules than a fairer one say based on fixed fees or hourly charging and independent of the investment amount. In your case your fee works out at 0.7%. Good value I would suggest. Good advice. Yet still not right!
    I really do think the FCA has got this one slightly wrong, is focussing on the wrong issues and by having a pop at small IFAs they are failing to look at the broader picture. The SJPs of this world for example.

    • It’s also interesting that the regulator expects firms to engage the theory of behavioural economics with its clients yet appears to fail when it comes to how its rules and guidance nudge firms to act in ways contrary to what it presumably wants to see.

      We were also part of the 41.7% though there was no discernible or potential client detriment as far as I could tell (I could understand the point they were making, it just seemed to have no practical value). This arose because we were trying to provide the client with choices (though rarely used). The upshot was to withdraw the choice. Why? Because it was easier, cost us nothing and reduced the regulatory risk. Behavioural dynamics at work.

  2. To publically condemn FAs on opinion rather than fact was and is disgraceful. It has happened before. Nowhere in published guidance is there any practical and sensible assistance for small firms who charge hourly for example. Even in Rory Percival’s video on specific disclosure there was an assumption that there was a contingent charge or that fees are related to investment size. The FCA has got this badly wrong by not understanding the market and thinking in terms of product – again.

  3. Neil you quote -:

    “We met the client in the specimen case on 14 June last year. It was complex, involving different pension types with funds totalling £167,000. We priced the job at £1200 and issued a client agreement by post 21 June which the client agreed 13 September. We got him benefits far in excess of his expectations and he was delighted. Not the FCA.”

    My question, who do we actually work for here…. the client or the FCA ?

    The client seem perfectly happy and understood your undertaking and costs, but not the FCA ?…. their only argument to this (which is hard to prove or discredit) is, “the client “may” not know they were in full possession of the facts or understood your documentation …… then offer no credible solutions ?

    We cant win and we are not meant too ….

    • Neil Liversidge 14th July 2017 at 11:24 am

      As mentioned above we’re still arguing this; I don’t think they understand our process despite it actually being very clear and simple. I’ve also run it by two respected journalists in a blind experiment and both of them got it immediately. Currently, I’m awaiting a reply to my latest communication to the FCA people looking at it. If I’m right though, and I think I am, the 41.7% figure is probably a load of old tripe.

      • Hi Neil

        interesting, my point and worry, following on from your response is, the FCA could then (because they or if they, believe it so)subject you and your company to further investigation, S166, or enforcement, when in real terms you have done nothing wrong from a client perspective, just not in the FCA eyes or their serious lack of understanding, ignorance if you will !

        • Neil Liversidge 14th July 2017 at 12:51 pm

          Fair play to them, I don’t think they’d try victimisation tactics. We’re having a constructive debate, the object of which is better regulation. The starting point for that though is them actually understanding the reality of the process and how it works, and I’m not sure they do. Page 7 of our client agreement, according to them, does not make it clear we charge an implementation fee. But page 8 spells out the cost in a detailed quote! They say that clients should not find out the total cost as ‘a surprise later in the advice process’. My argument is that the quarter second it takes to turn from page 7 to page 8 cannot realistically be called ‘later’! We may now be into territory where they are just determined not to back down come what may and regardless of the facts, in which case it’s like Man Utd playing Liverpool and the ref being the Liverpool centre-forward, but we’ll see!

          • Sorry for the slight chuckle Neil not aimed at you personally ….

            Is the reason for the civilized debate, because you are on the panel at APFA ? and a prominent figure in the financial service arena, and said FCA bod is minding his or hers manners ?

            I don’t think they would use victimization as a broad brush approach, but they are a corporate bully and we know they target low hanging fruit !

  4. Neil – I agree. The Handbook is incompatible with many fair charging structures, the proclamations by the FCA do not deal with specific issues and the inevitable result will be to drive the profession to % fees. I have said before – these are iniquitous. If we charged % fees, clients pay 3 times what they should while others only pay 50% based on “invested” sums. An apology is due to small IFAs and the FCA should be big enough to admit it.

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