The FSA’s discussion paper on the retail distribution review has been met with howls of protests from IFAs and with good reason. It is yet another example of the regulator not really understanding the true nature of the advisory process, the method of remuneration and the definition of professionalism.
It strikes me as absurd that just because you are well qualified and charge a fee, you are somehow more professional and should benefit from a lower level of regulatory scrutiny and are subject to lower levels of capital adequacy.
If on the other hand you lack the elitist higher qualifications and charge for your services using a mixture of fees and commission, you would be automatically deemed less professional and be unable use the term IFA. How daft.
The media is obsessed with knocking “commission-hungry salesmen.” How often do you read articles about solicitors “spinning for fees”? This is a term solicitors use to describe other solicitors who deliberately spend client time clocking up fees which are unnecessary. These so-called professionals often work quite unprofessionally using old-fashioned quill pen working methods which have barely changed since Dickensian times.
Forget systems and efficiency. Reinventing the wheel is the order of the day. Keep churning out those letters. Let’s face it, a quick email or brief phone call will not do when you can charge more for sending a letter. Many divorcees fork out £20,000-£30,000 each, even in average-sized non-complex divorce cases so clearly the media should be directing its attention elsewhere.
As for levels of capital adequacy, since when was this an issue for the vast majority of IFAs who have professional indemnity insurance anyway? A number of solicitors’ practices have folded in Milton Keynes over the last 20 years in spite of being so-called professionals.
The RDR, or really dozy regulation, is a classic bancassurer’s charter to rid us of the term IFA and ensure that the public gets even more lower quality advice from bancassurers.
It is astounding that the FSA supports these proposals when we have a very professional IFA sector which accounts for 80 per cent of new business and generates just 14 per cent of the complaints. These proposals will result in bancassurers who currently generate 20 per cent of new business and 86 per cent of complaints dominating UK financial advice and this will inevitably lead to poorer advice for Joe Public.
The banks have been ripping off customers for years without suffering very heavy regulation. Even when they start getting a pasting from compensation claims for bank charges, in steps the OFT (the Government) with a court case which results in the banks being let off the hook probably for several years. The cynic in me thinks it is inevitable that the banks will win their case.
Why do lawyers and bankers get off so lightly with regulations and bad press? Well, for a start, the Government is packed full of lawyers and bankers. The Government does not want to harm its chums in the legal profession.
As for banks, why would a Cabinet minister want to upset his banking pals when he has a nice, fat non-executive directorship lined up with one of the banks once he ends up on the back benches or retires from politics?
The FSA is the mouthpiece of the Government on financial services. The regulator has to justify its existence by periodically shaking up financial services in producing such poor discussion documents as the RDR.
It needs to adopt much lighter-touch regulation and the way to do it is by having regular contact with experienced IFAs, consulting them and taking on board their suggestions.
Tony Byrne is financial planning director of Wealth And Tax Management