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Tantrums over TCF

A few weeks ago, I suggested that paranoia is a key personality trait among IFAs. My comments stung quite a few of you into emailing me on the subject, with some of the responses weirder than the role played by Gene Hackman in the 1970s’ film The Conversation, where he appears as a surveillance expert who refuses to buy a phone and will not tell his girlfriend his real age or what he does for a living.

Another character trait I have come across in IFAs is “pre-teenageritis”. By this, I mean that many of them appear to have the emotional state of a child aged somewhere between eight and 12.

Those of you who are parents will almost certainly understand this particular age group and how it behaves. On the one hand, the child is coming close to the point where he wants to make his own decisions and eventually turn into a really disruptive teenager.

On the other hand, he still yearns for the security of a rule-bound environment, where his mum and dad tell him what to do, what to wear, when to go to bed and so on.

The most obvious example of pre-teen behaviour among IFAs can be seen in their response to the FSA’s attempts to move from rule-based to principles-based regulation, as shown by its commitment to treating customers fairly.

The FSA persists in believing that TCF is the way forward. In doing so, it has told the industry repeatedly that in return for a far greater commitment to TCF, it is prepared to move towards principle-based legislation.

Given the bitter dislike felt by so many IFAs towards the FSA, one would have thought that such an initiative would be welcomed with open arms. It raises the potential for advisers to move on to a new level professionally.

If implemented successfully, it also has the potential to benefit consumers, long treated as an unfortunate by-product of the industry. As one IFA once said to me, only half-jokingly: “Life would be so much better if we didn’t have to deal with the public.” Yet the move towards principled-based regulation is widely regarded with suspicion by advisers.

James Salmon, writing in Money Marketing last week, reports Aegon director of risk and compliance Graeme Dumble as believing “there is understandable resistance from many firms about making the transition after becoming so accustomed to prescriptive rules”. Elsewhere in MM, Shadow Treasury Financial Secretary Mark Hoban is quoted by Paul McMillan as agreeing with the Law Society’s attack on TCF on the grounds that it has led to an “unacceptable vagueness for firms” which are unsure whether or not they are compliant.

It occurs to me that the biggest problem for many advisers is that they are afraid of their clients. They fear that if they agree on certain standards of service with a client, which are then set out on paper, they risk being taken apart 10 or 15 years down the line. And horror of horrors, there will not be a regulator with rules they can claim to have followed slavishly, thereby escaping punishment for any alleged transgression.

There are ways round this issue. Fellow columnist Robert Reid suggested last week that the FSA might provide the industry with “scenarios where certain actions are undesirable or expected”. Personally, I do not see the FSA being willing to go down that road but I see nothing wrong with networks or big firms of advisers creating those scenarios for their members and RIs. These scenarios could then be published so that everyone knows what a firm will do for a client and what it will not.

A few weeks ago, I commended both Aifa and the first IFA chief executives’ Meeting of Minds event in London for the way they appeared to be inching towards an appreciation of how they can help improve the professional standing of their members and staff.

Since then, I have to say I was sent details of the actual discussions at the Meeting of Minds event and found myself a little disappointed with the lack of serious collective proposals emanating from it.

But it does not detract from my main point that, along with the Personal Finance Society, these institutions can play a part in creating a shared vision of best practice among the industry.

Most children need stabilisers to learn how to ride a bike but imagine how boring it would be if they were forced to use them or the rest of their lives. The challenge for IFAs is knowing when to take theirs off.

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