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Peter Herd: Why the MAS is wrong to link up with banks

Peter Herd MM blog

We are now four months into the RDR and the FCA and politicians seem to be confused about the new rules. We have MAS chief executive Caroline Rookes stating that she would like to grow partnerships with banks and building societies to bridge the advice gap.

This seems to be at odds with the MAS’s own advertising which says it gives unbiased advice, surely that means independent advice?

This decision looks even stranger when you consider the past record of banks and building societies.

Instead of serving the general public well, they have repeatedly proven that they are incapable of providing mass advice. After all, are they not the ones who are paying massive amounts of compensation for miss selling and left the industry with a terrible reputation. Therefore, the decision of Caroline Rookes to form partnerships with Banks and Building Societies is frankly strange

We should not forget that the FCA has a statutory objective to enhance the integrity of UK financial system.

I will not list the miss selling scandals of banks as they are too numerous but I think we have to consider whether this is a wise move on behalf the FCA and MAS.

Now as an IFA, I obviously have a vested interest in wanting the FCA and MAS to promote IFA’s, but surely this is also part of the FCA’s statutory requirement?

Doesn’t the FCA have a statutory objective to protect consumers?

How can the FCA protect consumers when it continues to allow and look for ways to allow unauthorised advice within financial services?

There seems to be a debate forming within financial services about what is “advice” and this is such an important subject for the IFA community. If we continue to allow the FCA and MAS to erode the legislation that underpins financial services we will not have an industry left.

I am so concerned about the continual erosion of basic principles within financial services I hope one of the trade organisations would consider taking our own regulator to court to enforce the principal of advice given by registered professionals.

The RDR was meant to make advisers more qualified to give consumers the confidence that they are speaking to a highly trained professional. Unless the regulator enforces basic authorisation regulations, there is no point in having higher standards within financial services.

We may be highly trained individuals who know what is regulated and unregulated advice that the consumer has no idea. The average person on the street does not understand the term regulated or unregulated advice.

They don’t even understand the difference between information only and advice so surely it is time for the regulator to do what its statutory power states it should and that is to protect the consumer.

The Money Advice Service is giving a confusing message particularly if it starts referring clients to banks for what the consumer considers to be unbiased advice. When you say that aloud it really does sound like a joke – a bank giving unbiased advice.

If the MAS is to survive, then it needs to start building links with IFAs. There may be only 20,000 of us left in the country but the regulator needs to start looking at the advice industry as individual practices, rather than big conglomerates that are only there to maximise their profit and don’t have client interest at heart.

When you link these two statutory objectives together e.g. protect the consumer and enhance integrity of UK financial system, I would have thought that dealing with smaller organisations over the whole of the country would give rise to fewer misselling scandals and give the client more choice. There is a saying and it is oh so true in the world financial services and that is big is not always beautiful.

Peter Herd is managing director of Essential IFA


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Paul MiTodger 9th May 2013 at 8:53 am

    Peter, the FCA does not erode the legislation underpinning financial services.

    As you should know, it makes and interprets the legislation as does the FOS.

    To have a healthy financial services industry there needs to be a range of outlets that can provide some form of advice to consumers.

    Like it or not consumers still approach banks even though they probably don’t trust them fully.

    bancassurance, whilst varying wildly in its quality did serve as a training ground for tomorrows impartial advisers and also introduced the concept of insurance, saving, pensions to the uninitiated consumer.

    It has always been far easier for an impartial adviser to interact with somebody who has previously been part of some advice process.

    The MAS should certainly point out the pitfalls of dealing with banks and online bucketshops and should also explain why an impartial adviser should be approached.

  2. Julian Stevens 9th May 2013 at 9:15 am

    Given that the MAS, by its own admission, is legally authorised only to provide guidance as opposed to advice, why is it allowed to call itself an advice service?

    Secondly, given that most of its budget is extorted from IFA’s under threat of putting us out of business if we refuse to cough up, why isn’t it obliged to make plain to those who avail themselves of its services that the reason it’s free to users is that it’s funded by IFA’s?

    Given that banks have by far the worst record for providing unsuitable or downright defective advice, why is the MAS talking about growing partnerships with banks and building societies to bridge the advice gap?

    And isn’t the primary reason for an advice gap the relentlessly increasing costs for intermediaries of trying to comply with all the new rules and regulations and red tape imposed by the regulator? Where is the balance? Where is there any proportionality? Both appear to have been sacrificed on the FSA’s altar of Utopian perfectionism, as a result of which advice is rapidly becoming (if it hasn’t already become) a luxury commodity that’s simply unaffordable for those of relatively modest means. Is this not yet another unintended consequence of the FSA’s RDR?

    Why isn’t APFA campaigning for these fundamental iniquities and the damage they’re causing both to IFA’s and to the public they serve to be rolled back? If APFA’s writing to the regulator raising these concerns but merely being fobbed off or ignored, why does it never seem to publish the responses it receives or refer them to Parliament? Given that APFA has on its council a member of the House of Lords, one has to ask whether or not his appointment serves any practical purpose. Why is he there if he doesn’t actually do anything of any practical value to the cause of the beleagured IFA community?

  3. The authorities have priced independent advice out from 95% of the population. Was that their stated aim 20 years ago? Have they made regulation too expensive?
    If the authorities thing unregulated advice is good enough for 95% of the population it undermines the notion of regulation itself.

  4. I hope this isn’t just warm words as what MAS needs to do in a hurry is to build links with IFA’s

    MAS seems to be about building links with big conglomerates like banks and building societies when reality there are 23,000 existing advisers around the country willing to take leads from MAS.

    The head of these quangos really need to see that economic problems they are causing in the sector that they represent.

    On one hand we have RDR stating that advisers need to clearly disclose charges upfront and on the other we have quangos that offers so called FREE FINANCIAL ADVICE.

    Particularly when it is not advice but is only information!

    I don’t see that as working closely with the industry!

    Have a read of MM article on what I thought of her comments on building partnerships with Banks

  5. I complained to the advertising standards agency (ASA) about the MAS adverts and their misleading name. Like others I was fobbed off. Until they change their name I will refer to them as the MES and tell my clients that. Other than that I think the idea of the guidance service is good and its website tools are helpful to me and consumers in general and to a very small extent my clients as the free booklets and annuity comparison site are a good starting point especially for those due to retire. The MES should and is obliged to work with IFAs, Banks and ALL stakeholders a d that is I believe what MAS were misquoted by the trade press as saying so personally Peter I think you are focusing on the wrong thing. The focus should be the misleading name and not misquited statememsts.

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