Tenet distribution and development director Keith Richards says the FSA’s warning that networks present a growing risk of consumer detriment will damage consumer confidence and undermine the sector.
In its first retail conduct risk outlook, published this week, the FSA claims the network model presents a potentially growing risk of consumer detriment due to weaknesses with systems and controls.
The regulator warns networks are under pressure financially and it is concerned about networks’ oversight of members.
The regulator says: “A number of networks are under considerable strain, with continuing pressure on income and low levels of profitability. In addition, supervisory activity with networks of various sizes continues to reveal significant issues with the control and oversight that networks exert over their appointed representatives.”
The FSA says there is a risk these problems will worsen in the run-up to the RDR as networks push to expand their adviser numbers.
Richards says the FSA’s claims will damage consumer confidence in the industry.
He says: “What a governing body should be doing is working to protect consumer confidence. Instead, it is publicising statements such as this which damage consumer confidence. It is difficult to understand what the FSA’s purpose was other than to cause speculation and undermine the sector.”
Richards says networks are being unfairly singled out as most businesses have struggled financially in the current economic climate.
He says: “There are many consequences of economic change for all organisations, they are not exclusive to networks. The FSA has merely given people who have an axe to grind with networks a chance to jump on the bandwagon.”
Personal Touch Financial Service sales and marketing director Dev Malle says: “It is quite concerning when these general comments are made and we are all tarred with the same brush.”