There is a danger a lot of the regulatory change or activity that will happen over the next six months will not reflect the best outcomes for anyone other than the regulator. Three recent ‘consultation’ papers on platforms, Arch cru and most recently the FSCS levy paper CP 12-16 give rise to these concerns.
Many adviser businesses are now under huge pressure to meet the requirements of the retail distribution review. But the FSA itself has been in turmoil and its priorities are much more focused on bank failures, as well as its transition to the FCA.
Whether advisers ultimately become independent or restricted will be irrelevant in the midst of the changes that will forge a profession.
There will be advisers who go beyond the minimum requirements and create professional, service-focused businesses. Great examples of such businesses already exist and are setting the standards for others to follow. They are successful, fee-based, have a tremendous future and they are financial planning businesses.
There will also be businesses that continue to provide product-based solutions for their customers or specialise in certain areas, which will have a different model to the planning businesses.
Eventually, we will get to the position where we understand how to apply consumer behaviour to the businesses we are involved in and start to focus on what is really important to clients The differentiator, however, will be the service proposition itself and not the products that are sold.
Regulators and associated organisations need to start focusing on this area if we are to make genuine progress under the FCA.
There is an opportunity to resegment the retail advice sector and it should not be too difficult to set out the difference between wealth management, financial planning and financial advice businesses.
It would then be far easier to test some of the proposals for the FSCS levy and professional indemnity insurance against some of these characteristics, rather on the products they may or may not sell.
The most recent consultation paper on the FSCS levy talked about the possibility of a product levy, which the FSA has rejected. This is an example of where more work needs to be done.
To say it is unfair on product providers because they would have to pick up the cost is a little two dimensional as the reality is that consumers will ultimately pay for the costs of the business from which they take their advice. There has to be greater responsibility associated with the products that are provided and establishing who is allowed to sell them.
As you sit back to enjoy the Olympic Games, give some thought to how you can contribute to establishing more compelling arguments for us to deliver to the FSA and others. Getting your response into the consultation papers with some constructive comments would be a useful start.
Nick Cann is chief executive of the Institute of Financial Planning