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Nic Cicutti: What is Apfa fighting for?


There are times when I really feel for Chris Hannant. It must be difficult for Apfa’s director general to find himself in the media eye all the time.

On the one hand you need to generate as many newspaper stories about Apfa’s activities as possible. Apart from anything else, the very future of the trade organisation you lead depends on your media visibility.

All the more so if you are walking a financial tightrope, as Afpa’s latest published accounts to the end of June 2012 suggest it might be doing.

It can sometimes be flattering to receive all that media attention. Even so, responding to constant calls from journalists asking you to be Apfa’s rentaquote can’t be much fun, not to mention all those articles you write in Money Marketing.

The difficulty is what to say. Looking at what Chris has written in recent months as well as what he has been quoted as saying elsewhere in the trade press, it is clear that a pattern is emerging.

First, is the repeated statement that the RDR is still bedding in. This line was apparent last week in Chris’s column for MM, where he wrote: “I believe it will take at least two years for the full impact of the changes to work through the profession, so it is far too early to draw firm conclusions about the outcome and impact of the RDR.”

Chris made much the same point in an article in another paper, where he commented on a survey by IFA firm Pi Financial of its members.

The survey found that 50 per cent of those polled said charging structures would not change as a result of the RDR and 30 per cent thought it had a beneficial effect on their business. This was the same proportion as those who said its effect had not been positive. The rest were undecided.

There, however, Chris permitted himself to be “cautiously optimistic” about the effect of the RDR on adviser numbers when end-of-year comparisons were made.

The second point Chris is making is that while the RDR is still bedding in, we should avoid tinkering with it. Again, he wrote in Money Marketing: “While the sector is undergoing a significant period of change, further changes to the regulatory environment will be destabilising to businesses’ ability to plan.”

Chris appears troubled at the way the FCA appears to be using policy creep to create outcomes that were, presumably, not part of the RDR’s original aim.

“What concerns me is that these ‘key issues’ were discussed by the FCA board less than six months into the RDR. The framework has been debated over six years.

“Advisers spent many hours and a lot of money preparing for and implementing the RDR changes. Many are still refining their business propositions as the changes bed down.”

To paraphrase Chris, this means advisers who spent years preparing for one expected outcome of the RDR are now faced with the devastating news that all their work was for nothing: the FCA has moved the goalposts and is demanding something completely different.

Really? Because that is not remotely my recollection of the debate over the past few years. My memory tells me that ever since 2007 what the FSA wanted, rightly or wrongly, was to create an environment where fees would be the accepted form of remuneration for a new generation of highly-qualified professional advisers.

The FSA also made it abundantly clear that it saw trail commission as being a payment that should be earned as a consequence of continuing service to a client in respect of the product sold.

Throughout that time, Apfa’s predecessor Aifa, not to mention the little splinter groups some of whose members now appear to be controlling policy at the new slimline trade body, bitterly resisted almost every aspect of the RDR, calling for delays in its implementation and endlessly arguing the toss about specific aspects of it, trying to put spokes in its wheels.

Then, once the RDR was in place, they discovered that, as with so many regulatory reforms in the past, you can briefly game the system by observing the letter of the law while completely ignoring its spirit.

At which point, they get dreadfully upset when they read in the FCA’s board minutes that the regulator is aware of what’s happening and is working out ways of stopping them from doing it.

In turn, Hannant gets wheeled out to mount a defence of his members’ business practices, asking for two years’ grace or more so they can eventually get to grips with the RDR – but only the bits they like.

Surely even he must know the FCA can’t allow that to happen. Better to deal with the matter now before bad practices become established, than allow it to linger on year after year and leading to another round of major regulatory reforms his members will like even less.

The problem is that if you do that, your members will not think you are fighting on their behalf. So you write columns that always look backwards and not forwards, for a constituency that while not particularly enjoying the RDR’s demands on their businesses, is slowly getting on with them. And, in its heart of hearts, it wishes you would too.

Nic Cicutti can be contacted at



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Nic

    I too have great sympathy for those who have to carry the baton at APFA. However I think you may have missed what I consider to be the nub of the issue.

    I had suspected for a long time that although there was sympathy at AIFA and latterly APFA for the small independent intermediary, that things were driven by the big boys. Not surprising as they had the biggest wallets and the small guys have always had difficulty in ungluing theirs.

    The mere fact that AIFA dropped the ‘I’ is testament. A very recent poll undertaken on behalf of Panacea shows quite clearly that over 80% of those polled have chosen to remain independent. Those in the poll tended to be the smaller intermediaries (10 RIs or less). Indeed when looking at the statistics generally whichever poll you care to examine it would seem that over 60% of all advisers comprise of firms of up to 5 RIs and the vast bulk of these are independent. The bigger outfits know full well that from their commercial perspective some form of restriction is in their best interests. Hence the current bru-ha concerning inducements. Of course they were most unhappy with the concept of fees as they foresaw the end of cosy deals with providers and of course they were going to lose control of the cash flow.

    As a topical example, I find it hard to understand the steadfast disinclination of AIFA and its successor, APFA to get involved at all with the Key Data case which seems extremely odd particularly in view of their enthusiasm to get involved with Arch Cru. I cannot avoid coming to the conclusion that this imposed silence by the trade body is at the behest of the big players rather than the little one’s because as Sherlock Holmes was want to say, ‘When you have eliminated the impossible, whatever remains however improbable must be the truth’.

    My conclusion? The interests of the small guys have been suborned by the big players. No doubt they will be trenchant denials. I understand the situation – any organisation needs funding, but at least be honest and say who it is you represent. True – the small guys have themselves to blame – if you don’t pay you don’t get. You can’t expect the big bananas to subsidise you.

  2. Harry, mine is a small firm. There’s one adviser – me – plus support staff. Last year we made £120k profit on turnover of £220k. I’m not embarrassed about running a small firm, I enjoy it. As you know Harry, I am on the APFA Council. It is utterly untrue to say ‘The interests of the small guys have been suborned by the big players’ and quite frankly I cannot understand why you do say it. Neither am I ‘subsidised’ by anyone. Anyhow, thanks for the latest instalment of ‘The World of Harry Katz’. It’s always amusing albeit fantastical.

  3. “My memory tells me that ever since 2007 what the FSA wanted, rightly or wrongly, was to create an environment where fees would be the accepted form of remuneration” UTTER TOSH!

    Nic your memory is seriously flawed. it is regrettable that MM gives you a platform to espouse your version of history. I quote directly from 2 FSA discussion papers and their final policy statements. I quote them directly. The word fees does not appear..

    In their discussion paper 07/01 the FSA stated they wanted:

    “remuneration arrangements that allow competitive forces to work in favour of consumers”

    In 2008 they said,

    “Financial advisers would operate remuneration arrangements agreed with customers and determined without input from product providers” and “we are not seeking to end the role for product providers in organizing payments to advisers from customers’ accounts or investments. ”

    In 2010 the final policy

    “Once the rules come into effect, adviser firms will no longer be able to receive commissions set by product providers in return for recommending their products, but will have to operate their own charging tariffs in accordance with our new rules. Should they wish to do so, providers will be able to facilitate the collection of adviser charges through the product on a matched basis.”

    The joke is pre and post RDR the only change to our totally compliant business model has been in the words we use- PRE “fee or commission” POST “fee or adviser charge every other aspect is identical. in other words million upon millions wasted so we could change some words oh and now, as the FCA freely admits, consumer access to advice could be restricted.

  4. Neil

    I rather think you have missed the point. Of course you are not subsidised. You were a member of AIFA and are still a member of APFA (as am I) – we pay our subs. I was referring to those who don’t join, don’t pay, yet expect representation.

    I stand by my view (as held for several years now) that it is the big outfits who have disproportionate influence. The have the organisation by the short and curlies. If they don’t get their way they threaten to throw the rattle out of the pram and APFA looses ten of thousands. The small guy on his own is merely responsible for hundreds. I am only setting out the plain facts. He who pays the piper calls the tune and those that pay most can make him dance as well.

  5. I think APFA’s biggest problem is that it has no clout against a very powerful and unaccountable regulator. It can hold meetings, make representations to the FSA and submit responses to FSA consultation papers ad nauseam but, if the FSA takes no notice of any of these representations and submissions, APFA surely needs to formulate a fresh strategy with better prospects of actually making some difference. It should, not least by way of Lord Deben (John Selwyn Gummer as he used to be known), be building alliances in Parliament and with the TSC towards the creation of an Independent Regulatory Oversight Committee, directives from which the FSA will not be able to ignore or casually and routinely brush aside. Such a Committee should be empowered to say to the FSA: This is wrong and you aren’t going to do it or This is wrong and you’re going to have to undo it. Report back to us in 3 months with your action plan to comply with this directive. The root of the problem is lack of accountability and this is what APFA needs to tackle, not head on (because we know that doesn’t work) but by a different route.

    In the absence of a clear and unequivocal strategy such as this, how can APFA expect to be regarded as anything other than just a talking shop?

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