McFall is cynical about the ability of the industry to move to a model where it is less reliant on upfront commission and rid itself of the negative effects of churning without a significant regulatory prod from the FSA.
McCarthy reassured him that far from sitting on the sidelines the FSA will be proactive in using its Treating Customers Fairly initiative to force firms it believes guilty of churning to change their ways.
He also warned that firms who stuck to this ‘merry-go-round’ of commission will be swept away by new entrants.
The FSA plans to publicise some of its initial review of distribution work in early November and we should get more of a feel about any further practical steps it will be taking in a very forceful agenda to mend what it sees as a broken model.
If McFall is worried TCF may lack the teeth to force firms to change, his fears may have been allayed by the massive fine handed out to Loans.co.uk this week for failing to treat its customers fairly when selling PPI.
The internet based firm were fined 455,500. It follows a 56,000 fine handed out to Regency Mortgage Corporation in September and John Tiner told the TSC it was actively investigating another nine PPI firms with the view of taking enforcement action.
With a March 2007 deadline looming for adviser firms to improve the way TCF principles are embedded in their business – after the poor showing in the FSA’s recent mystery shopping exercise- there seems no doubt the regulator will be true to its word and start spraying out fines if improvements are not made in that time.
Tiner told MPs he has been disappointed by the number of consumers paying fees since depolarisation and laid the blame with IFAs for not highlighting the fee option properly- using this summers mystery shopping exercise as evidence.
Tiner said the FSA will ‘push harder’ in this area, again emphasising the regulatory pressure that will be exerted on the adviser community in the coming months and showing – if there was still any doubt – that the move to principles will not mean a more relaxed regulatory view of the sector.
McFall, Tiner and McCarthy all seem in no doubt that a move to fees will offer a magic solution to the industrys problems but they might like to spend a few minutes studying the IFA Defence Union’s proposals to the Torys economic competitiveness review.
Of course we do not expect them to be too impressed with the IFADU suggestions to scrap the FSA and FOS, replacing them with smaller, less unwieldy organisations.
But its view that remuneration is a matter for adults and should not descend into a simplistic fees versus commission debate and its insistence that the method of payment is no guarantee of quality is something that needs to be taken on board in the current debate.