I have always considered that confidence flows from belief. As a child, I recall deciding that my belief in Santa was misplaced as my father was never to be seen when Santa was around. I later found that my suspicions were justified.
Last week, I went to a London conference to listen to Ron Sandler explain the rationale behind his recommendations. Those IFAs of a nervous disposition were best not to attend as he indicated that, in his opinion, the public believe that advice is free and IFAs have done nothing to convince them otherwise.
He went on to criticise the investment abilities of advisers generally and suggested that this will be acted on by the FSA.
The recently published investment workbook from the CII should be recommended reading for all advisers if we are to begin to answer his criticisms.
Once Sandler finished, I questioned him on the lower tier of adviser and asked him how complaints will be possible when there will be no suitability, no know your customer and no advice. Sandler corrected me that, yes, they will be giving advice, with the ombudsman bringing up the rear and creating “a set of rules” based on case law.
I have a real problem with this idea as the concept of the untrained advi-sing the public fills me with fear. I have never really understood why the Consumers' Association supports this approach. As we all know, decision trees simply do not work and consumers remain reluctant to educate themselves about investment and planning issues.
Ironically, I believe the banks will be concerned at this business model as it leaves them heavily exposed, given the somewhat idiosyncratic decisions of the Financial Ombudsman Service.
As Sandler said in his report, what advisers want is guidance from the FSA as to what misselling is and is not. This is no easy task for a regulator which to date has been unwilling to take a position.
But there is always the exception and David Severn telling us that the authorised financial adviser will not see the light of day was most certainly taking a position. Why anyone ever imagined that the FSA would accept hundreds of AFAs is beyond me. After all, this would have put the supervision structure of the FSA under pressure as these disparate firms could have tied up disproportionate resources.
How this will leave the recent acquisitions of IFAs by providers will be interesting as it unfolds. Buying IFAs and then merging them to create more value will be a lot like trying to put treacle in an envelope.
What was very clear at the Distribution Post-Sandler conference was that there is no love lost at the FSA for some of the recommendations from Sandler. This could mean that little of his report will ever see the light of day, given the FSA's reservations over the creation of what is effectively two sets of rules, one documented and one not.
As we wait for the final documents, it is clear that there is still time for lobbying and the chance to influence the outcome. So get out your writing paper now.
As the outcome of the CP121 consultation will arrive (according to the hints from Severn) just in time for Christmas, perhaps instead of writing to Santa we should be writing to Sandler and hoping for a Miracle not on 34th Street but on North Colonnade.
Robert Reid is principal of Syndaxi Financial Planning.
He can be contacted via email c/o the editor at email@example.com