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Phil Young: Passing the liability buck to advisers

Regulatory fees are rocketing and advisers are being asked to accept more risk into their business. At the same time, advisers are regarded as low risk compared to other parts of the industry. Something needs to change if the FCA is to fulfil its responsibility to encourage healthy competition among all aspects of financial services, as there is a long-term risk numbers will dwindle.
You have the opportunity to argue your case with the regulator direct and you should do so. The closing date for submission of a response to FCA’s regulated fees and levies proposals (CP15/14) is 18 May. There are two issues right now that need resolving but progress so far has been pitiful.

Money Advice Service
I believe there is a need for the provision of basic financial guidance to the mass market and help for those who need it. The Money Advice Service, funded by the adviser community, does not appear to have the confidence of anyone. Its strange co-existence with similar organisations such as the Citizen’s Advice Bureau and Pension Wise, the fact it was overlooked for delivering pensions guidance and the apparent disdain the Treasury Select Committee has for it (five reviews in three years and still no report issued) is unfair on those working within it and on advisers funding it. There needs to be some form of resolution on its future.

Pensions mess
Regardless of whether the new pension freedoms are a good thing or not, the current state of affairs is a mess and again highlights how disconnected things are. The current position, where those looking to access pensions are sent like a pinball around the industry bouncing between provider and adviser, is ridiculous.
However cynically you might view the Government’s agenda around the freedoms, it was clear the emphasis was on making individuals accountable for their choices around money. Since then, the buck for liability has been passed from the Government, to consumers, to the FCA, to providers and now to advisers. Advisers, understandably, do not want to get involved.
Most providers are refusing to act unless advice has been received, with insufficient guidance to encourage providers to allow access direct. There are glib comments from those not involved in the detail. In practice there are too many problematic scenarios, such as auto-enrolled scheme members being inadvertently kicked out of group schemes, inconsistencies between providers in terms of how far they go when checking if advice was taken and clients being forced to terminate their ongoing relationship with an adviser if they want to process the request direct.
There was always going to be a period of uncertainty while some of these issues were ironed out but there is little indication anyone really has the will or desire to resolve it. I find it hard to believe the only answer offered by the industry, including trade and professional bodies, to date is “do not get involved”. I understand the sentiment and why that might represent the best approach for advisers right now but it seems ridiculous the industry as a whole cannot organise itself sufficiently to allow business to be processed without appearing deliberately obstructive now legislation allows it. Mixed messages are leaving advisers in a difficult position and there seems to be a hope they will bear the burden of responsibility.
In the meantime, unregulated call centres are bombarding the public with calls to release capital from pensions and re-invest, on several occasions I have picked up on, into UCIS. Unless good advisers are given the confidence they can to engage with clients in this area, the bad guys will thrive to the long-term detriment of consumer confidence in financial services. Advisers will ultimately pick up the tab through the reputational damage and higher regulatory and FSCS fees.

Industry meeting
One of my colleagues is in the process of organising a meeting between representatives of the FCA, the Financial Ombudsman Service, professional indemnity insurers, pension trustees and defined benefit scheme advisers, product providers and, hopefully, HM Treasury and the Financial Services Compensation Scheme. This is not easy but there is an interest from most parties in making this happen. We are also finalising another detailed adviser guide on pension transfers and freedoms.
There is an opportunity as part of these discussions to try and put together a proposal for reform of the regulatory fees paid by the advice community. It also needs to be recognised that, to encourage advisers to actively engage with pension transfers and freedoms, there needs to be some comfort given around the risk of complaint or retrospective review, and future funding requirements.
There are plenty of piecemeal suggestions around reform but any deal brokered will be complex and require a trade-off between the constituent parts: FSCS funding, capital adequacy provision, PI requirements, long stop for complaints, FOS function and so on. There are no adviser representative bodies with the depth of knowledge, resources or political weight to piece this together and the new ones that come and go cannot attract the funding or support to change that. The answer must come from those of us working with the problem right now. First step: respond to CP15/14.

Phil Young is managing director at Threesixty



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. We are seen as an easy touch for regulators and interference. We provide little or no systemic risk and yet have disproportionately large numbers of rules, regulations and costs. We are easy to pick on.

  2. It is a two way trade, the good guys are happy to accept responsibility as long as they do not pay for the bad guys. Who in their right mind will take on more risk for which they are not compensated or protected, in the knowledge that others will fill their boots and disappear?

  3. John Hutton-Attenborough 11th May 2015 at 2:09 pm

    If this meeting is to have any credibility then the attendance of HMRC and FOS should be mandatory. You may also wish to extend invitations to the PFS/CII, APFA, Ros Altman and the new pensions minister, David Gauke.

  4. Phil – if we at Sense can help in any way or perhaps attend the meeting, we would be delighted to do so. For the benefit of the profession and the consumers, it is important that the fine detail here is ironed out.

  5. Duncan Carter 11th May 2015 at 4:54 pm

    Unfortunately we’ve had to put our hands in our pockets too many times and the new pension options are, under the current regulatory regime, a car crash waiting to happen.

    I want to advise and help people but we need some joined up thinking here

  6. Duncan Carter 11th May 2015 at 4:54 pm

    Unfortunately we’ve had to put our hands in our pockets too many times and the new pension options are, under the current regulatory regime, a car crash waiting to happen.

    I want to advise and help people but we need some joined up thinking here

  7. I don’t see it as the buck being passed to advisers, more that advisers are finally realising what their true responsibilities – and therefore risks – are. Elsewhere, providers are (rightly) waiting on the outcome of the FOS’ review of its Berkeley Burke decision and meanwhile sensibly hedging their risk by making sure that clients are advised by someone else.

  8. And I couldn’t suppress a wry grin at the Pru’s advert on my screen next to the opening paragraph of this article. “For UK advisers only … Roll over”. Diametrically opposed to Threesixty’s advice but, hey, it’s a point of view.

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