The handover of regulatory power to Europe will lead to a significant rise in regulatory costs for retail investment firms, says Personal Finance Society president Jon Everill.
Everill was appointed PFS president last month, taking over from Eddie Grant. Everill is a director of back-office technology firm Time4Advice and was previously a director at Bluefin and managing director of IFA firm Destini.
In his first interview as PFS president, Everill says he is concerned by the increasingly dominant role played by Europe in governing financial services regulation and the impact it will have on UK advisers.
The regulation of financial services in Europe has been overseen by three new European supervisory authorities since the beginning of the year.
These are the European Securities and Markets Agency, the European Banking Agency and the European Insurance and Occupational Pensions Authority.
The Esas aim to create a single EU rulebook and their powers include forcing national regulators to comply with EU law and, in an emergency, banning certain financial activities.
Everill says: “The issues we face from regulation are three to five years down the line and they stem from Europe and Europe’s complete command over what we do.
“The European regulatory system has reformed itself and it is hugely complex. The costs of that regulatory reform have been calculated in terms of set-up and operational costs but the cost for the average business has not been worked through.
“My only conclusion is that the cost of regulation for retail investments firms will go up significantly over the next three to five years and beyond.”
Everill believes the key to ensuring UK advisers have a strong voice in Europe is to begin with establishing an industry consensus.
He says: “For me, this is where the PFS is really important. If we create a profession, it is going to be more difficult to argue against the core facets of that profession, which are standards, competence, ethics and trust.
“If we can create a commun-ity which agrees on the commonality of the profession we could have a strong voice to represent us in Europe and eloquently argue our case. But as a disparate group of fragmented people, we stand little chance.”
In the short term, Everill says the PFS’s focus is on getting members qualified and helping firms get their business models ready for the RDR.
He notes that, separate from the RDR, the advice landscape is changing, with consumers already moving more towards a “do-it-yourself culture”. He says the number of consumers becoming “DIYers” is only set to increase.
As a result Everill sees the direct-to-consumer market as one the industry will look to capitalise on but says this will mainly come from providers.
He says: “It is an opportunity people will try to exploit more and more. But the only people that can do it properly are the ones with enough capital. It will be difficult for smaller businesses to set up these models because the cost of getting this stuff right is expensive, which is why not many people are doing it.
“I am not saying there will be an explosion in this market but there will be an uptake in D2C opportunities from the providers.”
As for financial advice, Everill is keen for advisers to view January 2013 as the “start line” for their business rather than a deadline they have to reach.
He says: “It is like when you learn to drive. When you start driving you look at the road right in front of you and when you get to be a better driver you look at the horizon.
“If we can get people looking beyond their feet to what they will do next, we will get some thought leaders and people leading our profession in the direction that we want.
“But it is hard to talk to people about that when they have got four more exams to take, 40 gaps to fill and 12 clients to see.
“What we are saying at the PFS is focus on now and we will try and help advisers get beyond that and build the next stage of their business.”