Speaking to Money Marketing on board the Pims conference this month, Cummings says he believes the RDR provides a unique opportunity for IFAs to take sole ownership of the advice tag and push out the salespeople who are currently masquerading as advisers.
But he says in order to repay the trust the FSA and Government have put in the adviser community, IFAs need to rise to the challenge and raise their game. Cummings says: “For the first time in my professional career, there is an opportunity to deliver on the trust that the FSA and Treasury have given us and become an IFA community that we can all be proud of.
“That does not come around very often. We have managed to get a doubting Treasury and a confused FSA to a point where they have given us an advice box, only for IFAs, everyone else is going to have to be a salesman. If we cannot recognise the opportunity that presents, then we should hang our heads in shame.”
Cummings is pleased that the RDR interim paper stipulates QCA level 4 as the minimum qualification for advisers but is not prescriptive about how to get there.
He says: “There is a commercial opportunity to do something different rather than get everyone to sit one exam. I thoroughly expect the professional bodies to be looking at their own assessment procedures.”
But Cummings believes membership of a professional body should be voluntary and not compulsory, otherwise there is no incentive for firms that want to differentiate themselves.
It seems that Cummings now has few concerns over the RDR although he would like to see the FSA aligning its timing better with the European Commission’s substitutable products review as he believes that there is a danger they could come into conflict.
He is also worried he has detected a cooling of attitude from the FSA on its proposals for a money guidance tier, which Cummings believes is essential for helping the public re-engage with finance. He says: “I have heard the FSA speak twice on this and it has gone from evangelical to a bit unsure. Money guidance needs to be well funded and completely independent from institutions with a vested interest in selling products. If this tier falls away, we will end up just shifting the deckchairs.”
Cummings does not believe the RDR should be extended to the mortgage market as he says consumer understanding of mortgages is much greater than their understanding of investments and other products. But he says the mortgage market still has some substantial problems coming its way.
He says: “The last time that we had a housing market crash we did not have statutory regulation. People complained but they complained about the lenders. Now my great worry is that if house prices continue to fall and people have not made sensible financial decisions, then consumers will start complaining about the people that gave them advice and saying they were not told they could lose their homes.”
Cummings says consumers have to accept responsibility if they were told they would need to make financial sacrifices to afford a mortgage and then failed to rein in their spending. He also believes the tripartite authorities are not helping resolve the upheaval in the mortgage market as he says they are pointing in completely different directions.
He says: “The Bank of England came to the market late and gave £50bn to seven lenders. We are up to £90bn now and my estimate is that the BoE will be in for £200bn by the end of the year and I cannot find anyone who is willing to disagree with me.
“The BoE has been doing this on the expectation that the money will be cascaded down and the Treasury has been letting it be known that all this lovely new money is coming in that is going to protect consumers.
“But we have the FSA saying it wants lenders to prop up their balance sheets and protect their capital position, and so lenders are not lending. The FSA has given up on conduct of business regulation and gone entirely to prudential regulation so it is all about the money now.”
Another area for regulatory conflict that Cummings highlights is the relationship between the Financial Ombudsman Service and the FSA. He says this is an area where the Conservatives are particularly concerned.
He says in some areas, such as payment protection insurance, the ombudsman is taking an opposite view to the FSA on claims, finding against firms that have been given a clean bill of health by the regulator. He suggests that the FOS should be able to challenge the FSA if it believes it to be wrong in such areas.