Over the past seven weeks, this series of articles has detailed the various aspects that will constitute the single regulatory regime following N2.
We have looked at the statutory responsibilities of the FSA, what it has accomplished to date and what is on the agenda in the months following December 1. We have also examined how it will interact with Government departments and trade bodies and the role played by other regulatory bodies.And we have provided profiles of senior and key people within the regulator.
With only two weeks to go before the FSA finally gains its full authority, IFAs have been inundated with literature about what they must to do to prepare for the new regime.
This must be quite overwhelming for IFAs, the majority of whom are small businesspeople trying to run their companies while juggling the obligations placed upon them by the regulator.
What will change in the post-N2 world for IFAs? How will their relationship with the FSA be affected by the existence of a single regulator as opposed to a number of separate bodies?
If everything goes to plan, there should be very little difference. Effectively, the FSA has been operating as a single body since October 1997. It has been preparing for the official handover since that time and, if one believes FSA spokespeople, is ready and waiting.
Saying that, there are a number of issues where IFAs will quickly notice a change, even if it is only the name at the top of the headed paper on the correspondence they receive.
Perhaps the most important thing as far as IFAs are concerned is how much are they going to have to pay.
Costs will remain the same until April, when the next financial operating year begins. IFAs will then receive a joint bill from the three bodies they contribute funds to – the FSA, the Financial Ombudsman Service and the Financial Services Compensation Scheme.
IFAs' share of the operating costs of the FSA have until now been covered by providers. The ABI and Aifa are currently in negotiations to continue this relationship but have yet to reach an agreement.
The ombudsman hits IFAs with a two-pronged assault. At the moment there is a fee of £500 for every complaint made against them. This is expected to drop to £350 per complaint after April, although this too is still being consulted upon.
The ombudsman also charges a general levy on all member firms, which accounts for the other half of its budget. The amount varies depending on the size of the firm so, proportionally, IFAs pay a lot less than product providers.
The running of the compensation scheme also requires IFAs to dip into their pockets but 85 per cent of these costs have long been subsidised by product providers.
It is again unclear whether this relationship will continue post-N2 but it is thought some form of subsidy will remain.
A one-off issue affecting IFAs is grandfathering, the process by which authorised firms continue their status after N2. For most, this is a straightforward matter of simply ensuring their own records match the FSA's in terms of number of registered individuals they have and the type of business they do.
But for a small minority, for example, IFA firms recently set up or which have significantly changed the type of business they conduct in the last six months, there still may be considerable difficulties in continuing their authorised status.
Grandfathering should be an issue that resolves itself shortly after N2. Most IFAs have received communication from the regulator that all is proceeding as expected.
As has often been mentioned in the past, the FSA is undertaking a major review of training and competence standards among advisers, which is likely to see significant changes to the level of expertise IFAs must attain. FSA head of industry training David Jackman is expected to publish a consultation paper outlining firm proposals for the way forward in December.
Some suggestions have involved getting rid of the alphabet soup of professional recognition letters following many IFAs' names, annual exams to maintain acceptable standards of knowledge and introducing further qualifications to increase public confidence.
A key part of the new regulatory regime is its risk-rating system. No longer will every authorised firm receive the annual visit from the men in black sunglasses. Instead, each firm has been allotted a risk rating depending on the type of business they do and the number of authorised individuals they have.
Most IFAs fall into the lowest categories of risk, C or D, which means they will receive comparatively the least amount of regulatory attention.
This does not mean the FSA will turn a blind eye to their activities. It means that, following a process aimed at spending the FSA's resources in the most efficient fashion, it has been decided to spend more time focusing elsewhere.
The final change, which IFAs are likely to be most grateful for, is the consolidation of all the regulatory rules and guidance into a single sourcebook. Some IFAs were previously authorised by both the PIA and FSA, which meant carrying around not one but two rulebooks.The change results in a single research tool but IFAs will be happy because it means less weight to cart around when they are out visiting clients.