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Party spirit

The Conservative pledge to replace the FSA with the Bank of England and a Consumer Protection Agency has been widely discussed. My challenge has been to sort out who would be regulating IFAs in future – and what  the new structure would mean. Hard to believe it could be possible but there is no point closing the door on one regulator just to inherit two, with more cost, more prescription and even more red tape.

Some of the proposals in the RDR will result in fewer consumers getting access to financial advice, so this is hardly a positive move. I am also concerned that all the attention has been focused on reforming regulation, when the role of the FOS needs to be reviewed in parallel

The conference season is a great opportunity to meet with ministers and their shadow opposite numbers to put the case for IFAs. Their civil service, or party “minders”, can be shaken off and a more open conversation had. By targeting the various party conferences, it has also been possible to speak to each of the relevant people and get under the skin of their parties’ more public pronouncements and start talking about the detail.

I think it is widely recognised that my view is our current regulatory structure is far too expensive and we often end up with regulation that is appropriate for one part of financial services but entirely wrong for another.

For instance, the debate about levels of capital is entirely appropriate in the banking community (who caused the global crisis and were over-leveraged) but has far less relevance for IFA firms.

Indeed, with the combination of professional indemnity insurance and the existing regulatory capital rules, attention should have been focused on leaving assets behind when a firm closes, not on arbitrary levels of capital.

Further, some of the proposals in the retail distribution review will result in fewer consumers getting access to financial advice, so this is hardly a positive move.

I have also been concerned that all the attention has been focused on reforming regulation, when the role of Financial Ombudsman Service needs to be reviewed in parallel, otherwise we risk creating another regulator – or leaving gaps in the structure.

Aifa has been welcomed into the discussions about the shape of future regulation. We are holding top-level meetings with senior politicians as we help design the future structure for regulation.

A seat at this top table would have been unimaginable just a few short years ago and it is now available to us because the IFA profession has seen the benefit of speaking with a single voice and presenting a united front – in the same way that the banks and insurers always have.

Members can be certain that we will be setting out our wishes to see a better, cheaper, more accountable regulator that, in protecting consumers, understands that this is best done by helping them access independent financial advice.

Chris Cummings is director general of the Association of IFAs

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Yes Chris, one voice is important but a bank is a bank whereas IFAs constitute so many disparate elements which often cannot even agree on which day it is. Take Towry law, one minute they were AIFA members and the next they wanted their ball back, I don’t remember what the problem with Skandia was but I do recall one of the founders describing IFAs are being ‘like children’, why he thought this was the case is so obvious sometimes. Being at the top table with politicians who don’t see any value in whole of market advice is like being at the top table with a regulator that sees horrendously poor advice in certain areas. It goes without saying that these opinions are formed by what they see rather than what they don’t see. Unless IFAs can demonstrate that they really are socially useful then they will continue to be regulated out of existence. The cost of regulation should not be of concern if it is proportionate to the risk posed by the firm, my feeling is that the effectiveness of the regulators should justify that cost. Since 2007 I have noticed a difference at the FSA but it is still a little too rigid for my liking and it lacks an understanding of what honest IFAs are doing on a daily basis. For those of you who have noticed a change in me you will find that it is a change for the better.

    l look forward to a future of change for the better in financial services rather than the constant change just for the sake of it over the last two decades.

    You need to work with the regulator as well as the people who change the legislation every time we have new political masters. You need balance and stability and without those two elements you will simply be creating periods of uncertainty where horrid things can happen, take Stakeholder for example, and take the FSMA 2000, please!

    The regulators are not the real problem, it is the legislation which is supposed to empower them to solve problems we have yet to experience, that doesn’t work as intended does it?

  2. UNDERSTATEMENT OF THE YEAR! 19th October 2009 at 3:22 pm

    UNDERSTATEMENT OF THE YEAR!

    “Some of the proposals in the RDR will result in fewer consumers getting access to financial advice, so this is hardly a positive move.”

    IN EXCESS OF 2 MILLION CONSUMERS WILL BE ORPHANED FROM INDEPENDENT ADVICE!

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