There are many more challenges being imposed on IFAs. For example, the need to submit quarterly returns to the FSA instead of half-yearly returns, the huge burden of red tape in writing business, pension-switching file reviews, increased FSCS levies, etc, etc.
It is clear that bancassurers and big insurance firms want to get rid of IFAs. They do not like the fact that IFAs write the most business in the UK.
The end result of all of these proposals will mean that fee-based professional financial planners will become the new breed of IFA and most smaller IFAs will fail to survive.
A consequence of the RDR will be that the old-fashioned sales approach of the banks and insurance companies will survive. I consider this to be a backward step.
TCF, while laudable in principle, appears to be largely an excuse to increase the FSA’s budget, resulting in 11,000 visits to firms over two years. As IFAs generate just 4 per cent of all consumer comp- laints, and that figure has fallen by a third over the last year, why is the FSA wasting such huge resources on policing the lowest-risk sector in financial services?
Using my firm as a typical example, we have had only two complaints in the last 10 years which have gone to the Financial Ombudsman Service. The first one was seven years ago and the FOS threw it out. The second one was last year. We await the FOS’s decision. Interestingly, this one has nothing whatsoever to do with the advice. It is a complaint about administration.
We pay about £6,000 a year in professional indemnity insurance premiums and a similar amount to the FSA/FSCS.
We also have a minimum required level of capital adequacy of £20,000. In addition, we have recently had to pay an extra FSCS levy of just over £1,000 primarily due to the failure of two stockbrokers. We expect a hefty increase in our FSA fees this year.
The main effect of the FSA’s regulation has been the enormous burden of red tape it has created and the ability to act retrospectively by dishing out massive fines to companies when things go wrong.
In spite of the challenges I see a time when the IFA profession will be seen as the pre-eminent profession in the UK if only because the way we are being pushed down this path. In the meantime, let’s keep regulation light touch.
Tony Byrne is financial planning director of Wealth and Tax Management