Former FSA head of retail investments David Severn has hit out at the regulator’s decision to axe the payment menu and the initial disclosure document.
Severn, who oversaw the early stages of the regulator’s depolarisation work, says the FSA’s retail policy “is becoming one irrational U-turn after another”.
He says: “We are told its policy is evidence-based but its research did not even look at the effect the IDD was having. We are told that the menu is ineffective in achieving its objective but the report makes clear for the most part it is too soon to reach a conclusion. We are told the menu and IDD are being kept as guidance but if they are both so ineffective as the FSA claims, why doesn’t the FSA scrap them altogether?”
The FSA said last week it was to withdraw its applications to the European Commission to retain the menu and IDD under Mifid after conducting research that found the documents were not meeting their original objectives.
Aifa has attacked the FSA’s justification for scrapping the menu and IDD and says it has moved the goalposts in terms of the original objectives of the documents.
Aifa deputy director general Fay Goddard says the original menu objectives were to increase transparency and consumer choice and reduce commission bias.
Goddard says the FSA is not an economic regulator and the primary objectives of the menu were not to drive down commission levels or increase fees, as the FSA stated last week. She says: “It might have been a desired outcome but the objective of the menu was not to reduce commission levels or to increase the take-up of fees.”
FSA director of retail pol-icy Dan Waters rejects Aifa’s arguments and says the FSA has been consistent in its objectives. He reassures advisers that a level playing field will be retained as single-tied advisers will be forced to disclose commission equivalence.
Aifa says it will hold the FSA to this promise.
Waters says the decision to withdraw applications to retain the menu and IDD had nothing to do with European Commission pressure and was purely based on the FSA’s own research. He says: “It is disappointing that the documents have not worked out but this shows the regulator reacting promptly to evidence-based research.”
Syndaxi Financial Planning managing director Robert Reid says: “Of course, this decision has to do with pressure from the EC. The FSA should have seen this coming a long time ago.”