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Nic Cicutti: Apfa was not behind FCA indy U-turn


First things first: the FCA’s decision to allow internal referrals among specialist advisers within IFA firms is to be welcomed.

The FCA last week announced it was rowing back from an earlier pronouncement, made in its March thematic review, whereby advisers could not call themselves independent if they referred clients to other internal experts.

The regulator said: “Some have argued that advisers may, often routinely, refer their clients to a colleague with particular expertise or experience, such as income drawdown.

“Having looked at these points, we agree that this wider interpretation is possible under the existing rules. We have now updated our website and the recent thematic review to make this clear.”

This is undoubtedly good news and will clearly help improve financial outcomes for many clients. They go to a particular firm of IFAs not because the adviser sitting in front of them is an expert on every subject under the sun but because of the collective knowledge and experience of the business as a whole.

The FCA’s recognition of this fact is not only a move in the right direction, it corrects a glaring error in its original guidance. As I wrote a few months ago: “When the regulator published its thematic review on independent financial advice in March 2013, it… introduced new potential hazards for anyone wanting to call him- or herself an IFA.”

The announcement also suggests that the FCA, contrary to what some readers of Money Marketing believe, is prepared to listen in areas where common sense clearly dictates that best practice should be the priority, not narrowly-drawn rules.

In passing, the move also removes one small obstacle that may have stood in the way of many financial advisers, to whom the use of the word “independence” still means something.

Of course, whenever the regulator amends a previous ruling – or appears to do so – everyone wants to claim the credit for persuading it to do so. Last week on the Money Marketing website, an unseemly spat has broken out over who played the biggest role in the FCA’s alleged volte-face.

Tessa Norman’s original article was itself totally even-handed: it simply reported that various individuals and organisations, including Apfa director general Chris Hannant, welcomed the move.

However, in the online comments published underneath her article, Apfa council member Neil Liversedge goes further. Defending Apfa against charges that its role in the U-turn was relatively minor, he writes: “Don’t snipe at Apfa though, it was Apfa that got things this far. I know because I was at the meeting where we hammered this home.”

While I don’t wish to break confidentiality, I too am aware of the meeting that Neil refers to and my view is this did not play a central role – or, to be honest, much more than a passing one – in the FCA’s decision.

No, I think there are other players and influences that were key in the process.

First, I suspect leading financial services barrister Peter Hamilton, who wrote about the of the original thematic review several months ago, was right when he said “no one outside the team that wrote the report sat down and thought about what the rule said and whether the report was putting an incorrect interpretation on the rule”.

Effectively, this meant that a combination of sloppy thinking and even sloppier writing meant the original guidance could be construed in different ways.

Having spoken to several advisers, I wrote that their view was “if an IFA were to ask a colleague in the same firm, or even in an outside company, to assist on specific aspects of product advice, this would usually be classed as acceptable to the FCA.” 

In essence, therefore, the regulator could just about argue that its latest pronouncement on the issue was more of a “clarification” than a change of mind. I don’t believe it and neither do you, but face-saving is often important in these matters.

Second, I think we should recognise the key part played by two other sets of players in the last few months’ discussions.

One is the Institute of Chartered Accountants of England and Wales. The ICAEW was reported several times as lobbying the FCA on this issue. 

Unlike Apfa, the ICAEW has far greater lobbying resources at hand. As Money Marketing reported in August, the charted accountants’ trade body met with senior ministers and officials at the Treasury, the Department for Work and Pensions, the Department for Business Innovation and Skills and the FCA, including chief executive Martin Wheatley, chairman John Griffith-Jones and director of supervision Clive Adamson, a total of 26 times last year. 

The other is the FCA’s small practitioner panel, which again raised concerns about the same issue earlier this year. The small practitioner panel consists not just several highly-regarded financial advisers but specialists in other areas, including friendly societies, mortgage lending and accountancy.

What this suggests to me is that if you want to achieve lobbying success on a particular issue but are a tiny and relatively weak organisation, the way to do it is to find out how your interests might align with other professionals and then form alliances with them.

Apfa might want to bear this in mind if it hopes to influence regulators or politicians in the coming months.

Nic Cicutti can be contacted at



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Perhaps Chris Hannant will have a quiet word with Neil and suggest that he should STF up instead of telling other people (like me) to do so.

  2. I think that the FCA U-turned because they realised ( belatedly ) that Peter Hamilton was right and that their incorrect ” interpretation ” required a rule change. Any listening to representations based on existing practice was ( or ought to have been ) irrelevant!

  3. For APFA to believe it can succeed in winning policy changes from the FCA when the TSC has, so far, failed to do so on so many similar issues is either extremely foolish, delusional or arrogant. Maybe all three. When, if ever, is APFA going to wake up and smell the coffee?

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