I can hear the cries of “I told you so” from the IFA community. Late last year, Consumer Focus courted controversy by accusing financial advisers of churning. Its report purported to show that consumers were being encouraged to switch to different pension products, often with higher charges or higher risk.
It added that the trend for products to charge trail commission was increasing in the run-up to RDR. The impression it gave was that IFAs were filling their boots while they could and, given the seriousness of the accusation, the FSA said it was keeping its beady eye on the issue.
But talking to Martin Wheatley, CEO designate of the Financial Conduct Authority, advisers seem to have nothing to fear. When pushed on the matter as to whether he had unearthed a churning boom, he said: “Not really. We are conscious of the issue but we have not found anything that shows it is systemic problem.”
With the clock ticking to RDR, perhaps Consumer Focus should start drawing up a humble apology to IFAs for making false accusations.
Wheatley certainly talks up the changes going on at FSA headquarters. Mind you, he needs to get a damaged public to trust the regulator again.
However, I am not sure how much confidence people will have when they learn that the new organisation is simply retraining existing FSA employees to change the way they inspect companies – or that some of the new recruits are former PPI salesman.
But Wheatley insists the FCA will be a different animal to the lacklustre FSA. Having departed these shores seven years ago for Hong Kong, he returned in 2011 and says he found the “depressingly familiar tale” of misselling scandals. The golden goose of PPI, as he terms it, was rearing its ugly head when he returned.
He proclaims that a new approach is needed to get the right outcomes for consumers and admits that “the regulatory model had failed”.
His assertion gives consumers a smidgen of hope, as will the FCA’s new powers. The new powers should enable it to act faster.
In the past, it has been like a 90-year-old charity marathon runner bringing up the rear. The FCA will be given powers to make a judgment before it has gathered all the evidence. And as of this week, its supervisor teams have been split into two camps, with one group solely looking after consumer interests while the other worries about a firm’s solvency issues.
Mr Wheatley said the FSA is already being more proactive and points to the recent warning on traded life policies, which he says “are probably unsuitable for most people”. But he is under no illusion about the task ahead and he expects the public to be cynical that the FCA represents a better era of financial regulation.
“We will be judged by results – that is the ultimate test. But the best referees are the ones you do not see on the pitch. A referee handing out lots of red cards does not create confidence.”
That’s as maybe but it seems that he is getting ready to hand out a few red cards to get his message across first. Providers, he says, need to put themselves in the position of the consumer and deliver good value products.
“Our experience suggests we are not there yet and it will take some strong actions to get there,” he adds. You have been warned.
Paul Farrow is personal finance editor at The TelegraphMoney Marketing