Specifically, I wanted to write about the Personal Finance Society’s first position paper on the RDR, in which it poses a series of ideas on how to boost professionalism.
After last week’s column – and a big thank you to those IFAs who emailed to say they enjoyed it – I thought that opportunity had been and gone. Then, in last week’s Money Marketing, I read that Aifa is planning to mount its “biggest ever” survey of advisers to help it inform its RDR response. Let me say at the outset that I think this research and the survey involved will undoubtedly offer some useful information about the state of the IFA market and the relationship independent advisers have with their clients.
At the same time, I can’t help feeling, as with so many Aifa initiatives, that the primary aim of the research – and its findings – will be used to underpin its defence of the existing status quo or relatively palatable version of it, allowing as many IFAs as possible to continue operating in much the same way as they have for years. Of course, I look forward to being proved wrong. Indeed, I want to be proved wrong.
But it is in that context that I dusted down my copy of the CII position paper to see how it differs in its approach to the RDR from that of Aifa. It is worth also mentioning its second paper, on the “alphabet soup” of qualifications IFAs are currently encouraged to “earn”.
The most striking thing about this paper is two things. First it doesn’t mention the dreaded “r” word – remuneration. This is a massive gap which it will need to address if it wants to be taken seriously.
However, where the paper scores highly is in its assessment of the industry as it currently stands. The CII/PFS document starts by pointing out that the growth in regulation of the industry has in large measure been dictated by its failure to come up with “a coherent set of industry-sponsored recognised professional standards”.
The PFS solution is that of creating a professional body, whose structure would “increase the quality of advice and so reduce the risk of misselling or other customer detriment.”.
In return for being members of such a body, advisers would receive “a lighter regulatory touch in monitoring and this could justify lower regulatory fees.” Of course, as the paper admits, before such a lighter regulatory touch could be applied by the FSA, a firm would have to demonstrate its commitment to the values of the professional body.
The PFS describes this as a “covenant”, in which regulated firms are required to show that its registered individuals are members of the organisation and intend to remain so during their continued employment by that firm. What sort of professional body would advisers be required to join? The PFS offers a vision where there would be a “single ethical framework” for all retail financial services practitioners.
Monitoring of members would be shared with the regulator but “insofar as it was carried out by the professional standards board and the professional body or bodies, it would be on a sample basis, making use of a variety of tools, including ‘mystery shopping’.”
All this is very good. However, what lets the paper down – apart from its reluctance to discuss remuneration methods – is the fact that it does not discuss the crucial issue of what advisory designation is necessary in order to join this body. In other words, is this professional body aimed at all salespeople or just IFAs and what would the minimum joining standards be?
We should not be too surprised by this gap in the proposals. After all, the PFS has never made a secret of the fact that in its current role it tries to unite salespeople, tied agents and IFAs in its ranks.
Actually, I can see a decent argument for letting them all be members of the same professional body, as long as the entry requirements are kept very high. It is unlikely that the vast majority of direct salespeople would bother trying to meet high qualifications standards set by such a professional body.
Even so, my one main reservation is the fact that, fundamentally, I regard salespeople as inferior to independent advisers. Which is why I find myself thinking what a great manifesto this would make for an IFA-only trade and professional body. What a shame it isn’t Aifa.
Nic Cicutti is the editor of moneysupermarket.com.