The president of the Chartered Insurance Institute, Lord Hunt, says the CII cannot act as another trade body and that if it were to fight the FSA on the retail distribution review proposals, it would not get very far.
He says the CII will support Aifa where it can but it must concentrate on its role as a professional body which sets standards and provides support to advisers to achieve qualifications within the framework of a code of ethics.
Hunt says: “Aifa is regarded as a good, strong trade body. There is no need for another trade body. That is the last thing we need. Anything we can do to support and strengthen the arguments of Aifa, the better. Equally, as a professional body, we have got to keep raising standards.
“If we were to try and fight the FSA, I am not sure we would get very far and anyway we are not a trade body so we should not be. We should be trying to work with whatever the system is going to be and back the system so we can offer help to all our members and potential members – not trying to get fees out of them but to offer them ways to the next stage.”
Hunt does not believe the CII will become a semi-regulator but it does have a role in policing its own code of ethics. He says: “We ask our members to observe that code and monitor that. The FSA takes comfort from that sort of a code being in existence but it does not think we are a semi-regulator. In principle-based regulation, the FSA relies on professions having their code of ethics which everyone subscribes to. If members do not subscribe to that code and if they start trying to give advice beyond their capabilities, then the CII has a role to bring them to book.”
Hunt says there will be a need to discipline members as this is part and parcel of establishing a profession’s reputation. He says: “I want people to feel proud to be part of the financial services profession. Our code of ethics is a step in the right direction but you have to monitor it. Although it is difficult, we have to discipline in order to get respect for the profession.”
Hunt points out that he sat in on many experienced advisers giving excellent advice when he was chairman of Aifa but he acknowledges that many may not have the qualifications and could struggle to achieve new benchmarks. He says the FSA may be flexible on this, reflected in the fact that the RDR is a discussion paper and there may be ways for this experience to be acknowledged although this would be part of a transitional phase.
He says: “Today, with the increasing emphasis on qualifications, we have to attract the brightest and best brains and there are those who perhaps will take a different route to those already established.”
When asked about a choice between CII and Institute of Financial Planning qualifications for professional financial planners, Hunt says: “Chartered and certified are not exactly on the same levels and Amanda Bowe’s response in the last two weeks has been to say that is fine. We were just citing two examples of qualifications the industry may be familiar with but it is up to the industry to suggest what the change ought to be.
“There are more important things than IFP versus CII. It is extremely important for people to be a member of a professional body. There are no more than 30,000 members of any financial services professional body when there may be upwards of 60,000, 70,000 or 80,000 practising advisers. The real issue is to promote membership of a professional body, bringing with it everything in terms of a code of ethics and professional development. That is the critical point.
“If you look at certified, it is not at the same level. If you are a certified financial planner, it gives you exemption from one of the papers for chartered status. The big issue for us surely is what the professional bodies have in common. That is the bigger picture.”
Hunt rejects any suggestion that former Life Insurance Association members have been neglected in favour of Sofa members, both now members of the Personal Finance Society. He says: “We need to support and help all sectors of the market make the transition. That is going to be easier through organisations like the PFS that are part of big organisations because the infrastructure is there. Likewise, it will be easier for advisers operating through networks and organisations such as Ken Davy’s because they have a third party that provides them with services.
“The crux for us has been to get to the small intermediaries and to do that in a way in which they can access our services. But we are determined to address all these constituencies because independent financial advice is a broad church.”
Hunt adds that the CII is not taking a view on commission. He says: “You know my view on commission because, as Aifa chairman, I argued very strongly for it to be retained when CP121 came out. This is not an issue for the CII. It should not be. Our issue should be transparency. If you see the code, it sets out that there must be a full understanding of where any conflict of interest lies. I think for us the question of remuneration is not an issue. What is an issue is conflicts of interest which is what the FSA is concerned about.”
But the CII will take a stand if it feels the FSA is not taking the right steps towards professionalism as part of the RDR.
Hunt says: “We have a vision of how professionalism should develop. In particular, over the next 18 months as the review process develops, if we feel the FSA is proceeding in the wrong direction so far as our vision of professionalism is concerned, we should say something because that undervalues our role as an educational body.”