Paralysed by Gunfire, but Denied Care

Having recently returned from a holiday in the US, I thought that IFAs would be interested in reading about this very sad case written, reported on by reported on by RONI CARYN RABIN on JULY 20, 2015 10:31 AM

“There is no video of the altercation between Monroe Bird III, a 21-year-old sitting in a car with a friend, and Ricky Leroy Stone, 56, a security guard who found them one night in the parking lot of an apartment complex in Tulsa, Okla.

But the tragic culmination of their encounter is not disputed: Mr. Stone drew his gun and shot Mr. Bird, leaving him paralyzed from the neck down.

Three months later, as he lay in the hospital hooked to a ventilator, Mr. Bird’s insurance company declined to cover his medical bills. The reason? His injuries resulted from “illegal activity.”

Yet Mr. Bird was not convicted of any crime in connection with the incident. He was not even charged.

Without insurance, Mr. Bird’s family could not move him to a rehabilitation center specializing in spinal cord injuries. He was discharged from the hospital and died at home last month from a preventable complication often seen in paralyzed patients.

The incident joins a disturbing litany of cases in which black men have been shot by white men in law-enforcement capacities. Mr. Bird’s family and their supporters believe racial bias motivated the shooting, at least in part, and protected the guard from criminal prosecution.

But Mr. Bird’s story comes with a particularly bitter sequel relevant to Americans of any background: The plan’s refusal to pay has left his family owing as much as $1 million in medical bills and, experts say, shines a light on a little-known loophole buried in the fine print of many health plans.

There are no firm numbers on how often insurers deny medical coverage based on allegations of illegal activity. But cases like Mr. Bird’s “are more common than people think,” said Crystal Patterson, an attorney in Minneapolis and chairwoman of the American Bar Association’s committee on fiduciary litigation.

Insurers have long relied on allegations of illegal activity to deny coverage to patients injured in a variety of contexts, from traffic infractions to gun accidents. The judicial rationale is that “we don’t want to reward illegal activity,” she said.

In one court case, a union health plan denied the claims of a worker’s son who was injured while allegedly building a pipe bomb, Ms. Patterson noted. In another, an insurer declined to cover the medical expenses of a man who lost control of an uninsured, unregistered car while trying to pass another driver in a no-passing zone.

Courts have upheld the denials even when there were no convictions for illegal activity. The administrator of the policy can deny claims even when no criminal charges are filed, Ms. Patterson said.

“The administrator gets a lot of latitude to make that decision,” Ms. Patterson said. “It’s a much lower burden than ‘beyond a reasonable doubt.’”

Lisa Stites, a spokeswoman for Craig Hospital, a rehabilitation facility for patients with spinal cord and traumatic brain injuries in Denver, said in an email that it was common for health policies to contain so-called exclusions for injuries resulting from drug or alcohol use, felonies, self-inflicted trauma or “hazardous” behavior.

Dr. Ford Vox, a specialist who works at the Shepherd Center, a rehabilitation facility in Atlanta, said the exclusions provided insurance companies with “an excuse to get out of very expensive cases.”

“The insurance can pull the rug out at any time,” said Dr. Vox, who also writes about medical topics for various publications. “And it’s all top secret — people don’t know about it until something happens to them.”

Insurance exclusions for illegal activity have been outlawed in some states, but state laws do not apply to health plans administered under the federal Employee Retirement Income Security Act, which sets standards for most pension and health plans in private industry.

Even after passage of the Affordable Care Act, self-insured plans regulated under Erisa maintain wide latitude to determine coverage. These plans “can do pretty much what they want to do,” said Robert Laszewski, an insurance industry consultant in Washington.

Mr. Bird’s family was insured by his stepfather’s employer, Southern Hills Country Club, and claims were processed by HealthCare Solutions Group of Muskogee, Okla. Citing privacy laws, representatives of both companies declined to comment on Mr. Bird’s case.

The events leading to Mr. Bird’s shooting may never be fully known. Like many trauma patients, Mr. Bird had no memory of the incident.

According to the police report, Mr. Bird was sitting in his car with a girl in the parking lot of the apartment complex where he lived with his sister’s family around 8:30 p.m. on Feb. 4.

Mr. Stone, the security guard, told police he approached the car because he had been instructed to look out for couples having sex in the parking lot. Mr. Stone said he shone a light into the car, told Mr. Bird that he was with security, asked for identification, and then tried to open the car doors.

Mr. Bird locked the car doors and tried to back out of the spot, according to Mr. Stone, who told police he stood behind the car to prevent Mr. Bird from leaving and was hit when the car backed up. He said that he jumped and fell against the rear window, breaking it.

When he was back on his feet, he said, he fired three shots as Mr. Bird drove away. He told police that he feared for his life.

But the car passenger, a minor whose name has not been released, told police she did not think the car struck the guard, and said the guard only started firing as they drove away.

Mr. Bird was paralyzed immediately and was treated in Tulsa hospitals for several months. In April, an official with HealthCare Solutions Group called Mr. Bird’s stepfather, Johnny Magness, to say that the company was beginning an investigation.

“I told her, ‘It sounds like to me you’re about to become the judge, prosecutor and jury,’” Mr. Magness said. “I said, ‘Please ma’am, don’t turn my son into a statistic. He needs care.’”

Two days later, the company denied coverage for Mr. Bird’s medical claims. The denial letter cited three exclusions, including one for illegal activity, which the letter said was triggered by Mr. Bird’s allegedly “striking the security guard with his motor vehicle and then leaving the scene.”

The denial meant the family could not transfer Mr. Bird to a rehab center where he could have received preventive care and adapted to life as a quadriplegic. The family appealed the denial, but it was affirmed last week.

This time, however, HealthCare Solutions cited “hazardous activity,” not illegal activity, and suggested that a third party, like the apartment complex, should pay the medical bills.

Mr. Bird’s medical claims might not have been denied had criminal charges been brought against Mr. Stone. But Oklahoma has a “stand your ground” law permitting citizens to “meet force with force” if they are attacked.

Steve Kunzweiler, the Tulsa County district attorney, concluded that Mr. Stone’s use of force was justified because he thought his life was in danger. “Mr. Bird might have made choices that might have gone a different way if he had listened to the security guard and obeyed his instructions,” Mr. Kunzweiler said.

Police discovered a vial of marijuana, illegal in Oklahoma, in Mr. Stone’s bag that night, and the results of a preliminary blood test showed that he had cannabinoids in his system.

David Riggs, a lawyer for Mr. Bird’s family, noted that the state’s stand-your-ground law did not apply when “the person who uses defensive force is engaged in an unlawful activity,” such as drug possession.

“The fact is, he was shot in the back as he was fleeing, driving away from this security guard,” Mr. Riggs said of Mr. Bird. “If there was ever a threat, there is no longer a threat.”

Repeated attempts to reach Mr. Stone for comment were unsuccessful. Mr. Bird’s family has filed a lawsuit against Mr. Stone, the security firm that employed him, the apartment complex where the shooting took place, and its property managers.

After the denial of coverage, Mr. Bird was discharged and went to his family’s home in Boley, Okla.

The young man, who required a ventilator to breathe, was cared for around the clock by his mother and grandmother, who fed him, bathed him, helped him cough, turned him in bed to prevent bedsores, and moved his limbs to maintain his range of motion, said Tezlyn Figaro, a publicist speaking on the family’s behalf.

Despite their care, Mr. Bird developed blood clots in his lungs and died on June 30”.

We do know that UK insurers have a clause in their policies regarding criminal activity such as: ‘We do not cover treatment you need as a result of your active involvement in criminal activity’.

The UK situation is slightly different as immediate A&E care would be provided by the NHS, the patient would then transfer to the NHS or private (as required) when they are stable.

We are sure most insurers would judge each case on its own merits and to our knowledge we have not seen a situation like this in the UK. 

However, we would be interested to hear of any example of declinatures such as this.

Don’t wanna confuse nobody, dont wanna be confused

European politicians reject plans for commission ban,making the FSA look increasingly isolated in Europe.Thefinal version of Mifid expected early next year, will combine the European Parliament’s amendments with those from the European Council – formed by representatives from national regulators – alongside the initial proposal from the European Commission.

 “German MEP Markus Ferber first took steps to remove references to a commission ban in March, and there has been significant opposition to the ban, proposed by the European Commission from both advisers and fund managers on the continent”.

Mifid is the key piece of EU regulation that is set to transform the way a range of instruments are traded in Europe. It aims to update and build on the reforms introduced by the 2007 directive, it is the European Commission’s proposed view on what the new rules ought to look like for all EU member countries.

So now, with this political rejection thrown into the mix,  are we all about to start walking down Conundrum Street?

Where does this proposed ruling fit with FSMA 200 regarding UK compliance with EU directives, will RDR produce two tier regulation, opportunity and remuneration and how will it affect advisers and most importantly the Consumer?

Uncertainty is the impact for sure, the FSA has pressed on with RDR regardless of advices from many, including the TSC to hold off until Mifid II decisions are clear. The European parliament earlier this year was reportedly set to reject the introduction of a Europe-wide ban on commission paid to IFAs and that is what appears could be now happening.

The EU parliament’s economic and monetary affairs committee had removed references to the ban in amendments to a revised draft of Mifid II. The European  Econ committee is proposing tougher disclosure rather than a Europe-wide ban on commission.

Swedish MEP and Econ member Olle Schmidt was on record as saying: “A total ban was not supported by the majority of Econ members”.

He went on to say: “If you introduce a ban, as in the UK, you can go too far. It would limit freedom of choice for ordinary investors and those most in need of advice would not be able to afford it. A more balanced approach is needed. There are other ways of safeguarding investor protection.”

As an industry we have all been led to believe by the regulator that they were as one with European Union regulation plans yet it would appear this might not now be true.

There are some overlaps with existing UK regulatory requirements and planned regulatory changes, such as the RDR, which could lead to implementation challenges for firms. For example, the MiFID II proposals set out that in order to qualify as ‘independent’, advice should be based ona ‘sufficiently large number of financial instruments available on the market’

However, this is different to the definition adopted as part of the RDR.

In addition, the proposed scope of Mifid extends to include structured deposits but the confirmed scope of the RDR does not. Under the RDR changes, advisers giving restricted advice (as well as independent advisers) will not be able to receive commission. These differences will need to be addressed by the relevant bodies prior to Mifid implementation.

The TSC advised Messrs Sants & Turner earlier this year that EU rulings could throw up some difficulties with the grand plan and this clearly fell on deaf ears.

So with all this confusion swirling around, Linda Woodall has ‘upped the anti’ telling advisers “ Don’t be caught unprepared for RDR”. She wrote a very long article and when referring to implementation deadlines being only a few months away, she said, “it’s time to embrace the changes that both regulators and industry have worked so hard to achieve……….the FSA is committed to helping advisers achieve a charging model which works for them, their clients and for the future.

Think about this now before it’s too late. Any London-based advisers will be familiar with mayor Boris Johnson’s catch-phrase for travelling during the Olympics: ‘Don’t get caught out!’ This is sound advice for all as we prepare for the RDR.

Wise words that sadly only appear to apply one way, the FSA have a history of being caught out failing to listen to “sound advice”. Is this yet another example of the European Parliament’s amendments putting a spanner in the works at Canary Wharf?

Ms Woodall may wish to take something from the EU position, the great Mr. Dylan’s lyrics sum up that something very well:

“But if you do right to me, baby, I’ll do right to you, too

Ya got to do unto others Like you’d have them, like you’d have them, do unto you”

UK firms have spent quite enough time and money dealing with “having it done unto them” please do not have them spending any more until Mifid is 100% clear to all.

He said She Said?

 

Compliance and protecting yourself against the impact of “He said/ She said” claims can no longer rely on file notes and correspondence. This is a sad fact in any business today and especially in the world of financial services

The Regulator and the Ombudsman expect firms to be ever more diligent in record keeping and how you monitor and control your staff on and off-site can no longer be based on trust.

So many large firms and institutions today record telephone calls under the guise of “training and quality control” simply to protect themselves against opportunist claims from an ever more compensation hungry consumer.

No joined up and creditable record keeping today therefore equals trouble.

All adviser firms would probably like to record all their telephone calls if it was it easy and cheap to do and if you were able to store the records conveniently with quick access to them. But for small firms this is a real issue.

The benefits are easy to see:

 

Business protection: You can produce clear and totally unambiguous evidence in the event of a dispute about what you or did not promise to a client from call made on and off-site.

 

Staff Training: Record the various client/ adviser conversations between team members and customers then you play them back together to ensure compliance and good advice standards are being met.

 

Quality Control: Play back call records at random to check that your staff members

are saying the right things and representing your business appropriately.

 

Compliance Management: Call recordings give a very convenient way to demonstrate to regulatory bodies that you are complying fully with your regulatory responsibilities.

 

You do not need any kind of special licence to record your calls and you are not even obliged to tell your clients that you are recording calls.  The law just requires that at least one party in each conversation is aware that the call being recorded.

Cost and complexity are a very big problem, recording staff calls made off site by mobile or landline is just a nightmare. Equipment, call storage and retrieval are another obstacle to overcome. Until now small firms have neither had the money, space or resource to reasonably and reliably do so.

With traditional telephone solutions you need expensive equipment (which also bring a maintenance overhead) and it is not easy to keep a readily accessible archive of your call records

But now, low cost salvation is at hand. PanaceaIFA has teamed up with YTEL and their new-generation VoIP telephone system removes these obstacles completely.   The system records all incoming and outgoing calls automatically.

Recordings are stored securely in digital format on their hosted servers for as long as you need them.   You can access and playback your call recordings easily via your PC.   You can search the call archive quickly either by date or by telephone number.

 

You can set up a new YTEL telephone solution with no initial cash outlay.   They will supply you with new phones and take over your telephone numbers from your existing provider.   Then you pay a monthly service charge based on the number of phones you use.    If you prefer to buy your phones outright then you pay a lower service charge.   There is no minimum period of contract.  You can close your account at any time for any reason with no cancellation charges.

This is a simply fantastic, low cost solution that will add extreme protection value at very low cost to your business, do call 023 9267 8800 or visit their website today.

Should I dress like a woman and act like a man?

The highly successful 1982 film ‘Tootsie’ starring Dustin Hoffman, is about an unemployed actor who disguises himself as a woman to get a role in a soap opera.  As it is ‘Women in Financial Services’ month, this got me thinking, in a male-dominated industry, should us ladies dress like a woman but act like man in order to gain success?

I have worked within financial services for the last 15 years and over that time have noticed that in a male dominated industry, women only seem to be prevalent within administration, marketing or HR functions; the glass ceiling remains, with women extremely underrepresented in senior positions and currently not a single global financial institution is run by a woman.

Research by head-hunting firm Odgers Berndtson, published last year (2012), revealed that women occupy just 23% of board positions within private companies in the UK, and although the number of female board members has increased since 2009, the rate of growth is a pretty pathetic 2.1%.  These figures are for companies overall, and if you look at financial services specifically the number of women in positions of power falls even further.  Additionally, according to Touchstone Financial Analytics, only 17% of financial advisers in the UK are women.

The stats don’t lie and the fact remains that financial services is still a man’s world.

Some could argue that looking to employ more women within high powered positions equates to ‘positive’ discrimination.  Surely the ability to do the job is what counts and gender should not matter. So what is the case exactly?

In some areas, such as the front office, the explanation could be of a more physical nature.  An ex-broker friend of mind says:

“I started on a trading exchange 18 years ago and although there were several women working there, most were in “support” or client liaison roles. This was the end of the 90’s where ‘girl power’ and the whole ‘ladette’ culture was rife; a few strong willed women had crossed over the male-dominated division to become traders. Six years on there were exactly zero female traders left on the exchange. It was suggested that physical issues held women back; our voices were harder to be heard over the men and when trading the “kerb” our smaller frames allowed us to be pushed out.”

Would a more aggressive, larger-framed, louder female make the grade? And does this mean that women should become more aggressive to get ahead?

Did testosterone fuel the financial crisis?

According to a recent interview in the London Evening Standard economist Vicky Pryce believes:

“Studies about [these] traders find that — partly because of the hormones — they don’t actually think they are taking risks, they’re just optimistic. They think they’ll beat the market… and they think, ‘I’d better deal with someone else who also thinks this is a fantastic idea, rather than [someone] who thinks it’s really risky’.”

Pryce believes women are better at ‘collegiate behaviour and caring for the common good’.

However, this can only be the case when women are behaving naturally and not trying to compete with their more risk-averse, optimistic male colleagues by acting just like them.

The new ‘Old Boys’ Network

History has shown that when women work together, they are successful in their aims, from the Suffragette movement in the early 1900’s to World War II, where women made significant gains in the workplace, demonstrating they were capable of performing in the work place as well as men following.

In the modern world and with the rise of social networking, we have seen a number of dedicated forums and events set up specifically for women in business, and an increase in female-only social networking sites which gives them the ability to talk more freely – the modern day equivalent of men on the golf course. Men help each other, so why shouldn’t women.

Holly Mackay, MD of The Platforum is an inspiration to aspiring ladies in financial services – having evolved her business from, in her words, “typing on a laptop next to the ironing board in my 2nd bedroom” to building a profitable and successful company in five years with two children under five. Holly is so passionate about helping young women in the early stages of their financial services career, she holds an annual event for women-only to hear from senior female directors and build a network.

“I think it’s such a shame that financial services is still so blokey. I think it can be very intimidating for young women to stand up and join the conversation. We all talk about how we fail to engage with consumers, how we talk in jargon and alienate ‘real people’ – I genuinely believe this would be different if more women had a voice in financial services. The CEO of Procter and Gamble regularly talks about how teams of men and women perform better than teams of just one gender. I long for the day when the boss of a life company, an IFA firm or a fund manager acknowledges the problem we have – and does something about it. Once a year, we run an event which is principally designed to help women build a network, share ideas and find inspiration and mentors. Anyone who would like to come is most welcome to get in touch with me – if your boss is a bit mean or you won’t get approval for the £200 conference fee, I’ll invite you as my guest.”

In fact, according to a report by the Credit Suisse Research Institute, created in 2008 to analyse trends expected to affect global markets, shares of companies with a market capitalization of more than $10 billion and with women board members outperformed comparable businesses with all-male boards by 26 percent worldwide over a period of six years.

Personally, it is my belief that to be hugely successful within financial services as a woman you are still expected to harp back to the 80’s ideal of the “Iron Lady” image – if you want to do the job of a man you have to think like a man and act like a man. In many cases you have to be more ruthless than a man to prove your worth. I have never been to a senior management meeting chaired by a woman and she has been dressed in anything less than a suit that wouldn’t have looked out of place on good old Maggie.

It was greed and over-lending that fuelled the financial crisis and a sense of “invincibility”. I believe that possibly women in the higher positions of the institutions that aided the crisis had just as much pseudo-testosterone as the men, so blame would fall at both sets of Gucci-clad feet.

However, in this changing world you have to play the long game. A career is built slowly and steadily. You work your way up through a much stricter hierarchy, earning respect, not as a sheep in wolfs clothing, but as an equal, with a different perspective, which can balance the business, confident in the knowledge you’d have the backing of other females colleagues, as men have always had.

If women think like women, act like women, support each other and stay true to themselves, in a male oriented environment, it can only be for the benefit of the industry as a whole and I for one will not be donning a pinstriped power suit any time soon.

Sarah Paul

Marketing Director

PanaceaIFA

 

Useful Links

Women in finance: the past 50 years

BCG Women Want More (in Financial Services) Report

Women in Banking & Finance

City Women’s Network

Top 10 Professional Networks for Women in Finance

United Nations Women’s Empowerment Principles

 

What is Mifid? Just the basic facts, can you tell me where it hurts?

 

It is the Markets in Financial Instruments Directive – and it came into effect on 1 November 2007

 

Mifid II is the key piece of EU regulation that is set to transform the way a range of instruments are traded in Europe. It aims to update and build on the reforms introduced by the 2007 directive, it is the European Commission’s proposed view on what the new rules ought to look like.

 

It has a number of key themes:

 

Transparency is key: Transparency is the central theme of the Mifid rules and the European Commission is determined to ensure that the main rules around transparency in equities are extended to other products too, including bonds, commodities, derivatives and structured finance.

 

Clearing houses competition: The Commission plans to overhaul the European clearing market by forcing exchanges to allow clearing houses to access their clearing flows. The rules will finally put an end to ‘vertical silos’ whereby exchanges restrict access to their downstream clearing houses thereby enabling them to dominate both the trading and clearing of instruments on their platform. This is likely to have major consequences for the exchange industry, which in recent years has been busy building and reinforcing vertical silos.

 

More competition in derivatives trading: The new clearing rules will help aid competition in the derivatives industry by allowing upstart derivatives trading platforms access to existing derivatives clearing pools that are vertically integrated. This will be welcomed by the majority of industry participants who have long complained that derivatives trading in Europe is anticompetitive. The rules will also force widely traded derivatives out of the over-the-counter market and onto trading platforms.

 

Tougher rules for over-the-counter trading: 
The European Commission has pushed ahead with a more stringent version of its controversial proposal to create an additional trading category, an ‘organised trading facility’, in a bid to force OTC trading into the light. Banks will not be able to put their own capital to work in the OTF category, which will make it very difficult for investment banks, which use their own capital in a variety of ways throughout the business, to implement. Only ad hoc trading of shares and other instruments will be allowed to take place off a platform.

 

Automated trading assault: European efforts to regulate high speed trading will be covered by the Mifid regulation. The most controversial and confusing of these is the requirement for firms to operate a ‘continuous’ algo trading strategy during trading hours. This would imply that a firm would have to continue to trade regardless of the prevailing market conditions. The rule would inevitability result in some firms taking enormous losses and is — in the view of some market practitioners — a poorly worded piece of text that will inevitably have to be changed. In the meantime, however, algo-trading firms will have to provide local regulators with a description of the nature of their algorithmic trading strategies once a year.

 

Best execution remains a fudge: Many market participants have complained that the concept of best execution, that was so central to the philosophy of the original Mifid, has proved to be a damp squib since it is not a hard and fast rule and is subject to interpretation at the national and firm level. Firms hoping that the rule would be improved were disappointed, when it emerged that it had not been strengthened.

 

Commodity trading limits: Despite much industry pressure, limits on commodities trading positions are to be enforced although these limits are unlikely to be set in stone but rather subject to regulatory discretion. Regulators will have the power to limit the ability of an individual or firm from taking over-large positions if they feel that doing so is damaging to the market.

 

Consolidated tape will be commercial: The Commission has allowed for the creation of a commercial, rather than a mandated, trading tape of record. This will dismay many trading firms that are worried that the commercial model will lead to multiple trading tapes thereby creating less, rather than more, market transparency and keeping trading data prices high.

 

Esma powers to grow: Much of the new texts will be referred to pan-European watchdog the European Securities and Markets Authority to implement. Esma will also be given the power to intervene in local markets to enforce the rules and ban certain products or practices. This is likely to be an area of major contention and one that many of the member states in the Council will seek to water-down in order to preserve the power of their local regulators.

 

Trading halts softened: Mifid II will determine how share trading is to be suspended across Europe’s trading venues. Earlier versions of the text had suggested that a trading suspension on one platform ought to trigger a suspension on all platforms. This rule seems to have been refined, however, and now appears to apply under specific conditions. It does not appear to apply in instances where technical problems bring down a platform.

 

2. How will it affect advisers? Uncertainty is the impact, the FSA has pressed on with RDR regardless of advices from many, including the TSC to hold off until Mifid II decisions are clear. The European parliament is reportedly set to reject the introduction of a Europe-wide ban on commission paid to IFAs. The EU parliament’s economic and monetary affairs committee has removed references to the ban in amendments to a revised draft of Mifid II. The European The Econ committee is proposing tougher disclosure rather than a Europe-wide ban on commission. Under the proposals individual EU member states would be allowed to ban commission, leaving the RDR in tact.

 

Swedish MEP and Econ member Olle Schmidt told the newspaper: “A total ban was not supported by the majority of Econ members”.

 

He went on to say: “If you introduce a ban, as in the UK, you can go too far. It would limit freedom of choice for ordinary investors and those most in need of advice would not be able to afford it. A more balanced approach is needed. There are other ways of safeguarding investor protection.”

 

3. When does he think the final rules will be decided on? The implementation timeline is still not clear. The proposals published in October 2011 have passed to the European Parliament and to the Council for negotiation and adoption.

 

The requirements are not likely to apply until 2 years after they have been adopted and published in the Official Journal. However, there will be some exceptions to this. Furthermore, the Directive will need to be transposed in the national laws of the Member States, which can be a lengthy process.

 

Given the timeframes set out it does not seem likely that the G20 deadline for the trading of standardised derivatives on electronic platforms by the end of 2012 will be met.

 

Does he think it’s going to be a positive for the industry? The jury will be out for some time on this and once again the industry cost is enormous. The EC’s own cost estimates set the one-off compliance costs between €512 and €732 million and ongoing costs between €312 and €586 million. Although the costs are anticipated by the EC to be less than for the original implementation of MiFID, in practice these could be far more for some firms, particularly where significant IT changes are required.

 

There are some overlaps with existing UK regulatory requirements and planned regulatory changes, such as the RDR, which could lead to implementation challenges for firms. For example, the MiFID II proposals set out that in order to qualify as ‘independent’, advice should be based on a ‘sufficiently large number of financial instruments available on the market’.

 

However, this is different to the definition adopted as part of the RDR. In addition, the proposed scope of MiFID II extends to include structured deposits but the confirmed scope of the RDR does not. Under the RDR changes, advisers giving restricted advice (as well as independent advisers) will not be able to receive commission. These differences will need to be addressed by the relevant bodies prior to implementation.

 

Please do not start me off on the aptly acronymed MAD- Market Abuse Directive as I have now “become comfortably numb”

 

Research sources Deloitte’s & EF Financial News, FT, BoE and FSA *

 

 

Bonfire of the insanities?

 

Michael Fallon is a decent man from my experience of meeting with him in March 2010. He is now 60, and served in the governments of both Margaret Thatcher and John Major.

He rightly admits that not nearly enough has been done for business since the Coalition Government was formed and says that: “We’ve got to accelerate and scale up.”

Even Andy Haldane, Executive Director of Financial Stability at the Bank of England reckons financial regulation is too complicated and that the rule book should be torn apart. He is quoted as saying that “complexity generates uncertainty and it requires a regulatory response founded in simplicity- less may be more”.

To this end, Fallon announced this week a radical new “scrap as you go” plan aimed at doing away with (or substantially scaling down) some 3,000 regulations that hamper business by the end of next year.

Financial services cynics will no doubt be shouting with some degree of anger, ‘what about us’, upon hearing of this latest froth and bubble Government exercise?

Mr. Fallon was no financial services expert when I met him but may be now with his ‘time served’ on the TSC. Given the mission statement perhaps he should get a coffee date in the diary with Mark Hoban’s replacement Greg Clark if he is determined to deliver on the statement “I’m re-lighting the bonfire [of regulations]?

Fallon reckons that the current regulatory approach of “one in, one out only limits new regulation, there’s far too much existing regulation: pointless annual checks, box-ticking that small firms have to pay consultants for, repetitive checking of certificates, and more.”

But Mr. Fallon should note that the framework to deal with the tangled web of regulation we and others try to fight their way through already exists and has done since 2007.

It is the Regulators Code, an important document so far ignored by the FSA, and no doubt others too.

The regulators code makes interesting reading, in fact you can access it on our website.

Its aim, well stated in a forward by Jim McFadden MP is to embed a risk-based, proportionate and targeted approach to regulation and enforcement among the regulators it applies to.

The term ‘regulator’ is clearly defined in the code as any organisation that exercises a regulatory function.

This does not apply in Wales, Scotland, and Northern Ireland!

A regulator is not bound to follow a provision of the Code if they properly conclude that the provision is either not relevant or is outweighed by another relevant consideration.

Importantly, the Code does not relieve regulated entities of their responsibility to comply with their obligations under the law.

The code is based on the Hampton Principles and states regulatory activities should be carried out in a way which is transparent, accountable, consistent and proportionate; and that regulatory activities should be targeted only at cases in which action is needed.

The following are among its stated aims and intentions consideration-

  • To act as an enabler to economic activity.
  • To consider the impact that their regulatory interventions may have on economic progress, including the costs, effectiveness and perceptions of fairness of regulation.
  • They should ensure that any decision to depart from any provision of the Code is properly reasoned and based on material evidence.
  • Where there are no such relevant considerations, regulators should follow the Code.
  • They should only adopt a particular approach if the benefits justify the costs and it entails the minimum burden compatible with achieving their objectives.
  • Regulators should seek to reward good levels of compliance by way of lighter inspections and reporting requirements where risk assessment justifies this.
  • They should also take account of the circumstances of small businesses, including any difficulties they may have in achieving compliance.

The Regulators code of 2007 has been overlooked by the FSA.

Will it continue to be by the FCA and will Mr. Fallon reference it when building his regulatory “bonfire of insanities”?

It spells out clearly what it is not being applied to the thinking of the FSA to date in establishing financial services regulation.

I have written this week to Mr Fallon on the subject.

Will he conclude that the concerns of so many in our industry at least are not relevant or are totally outweighed by other relevant considerations- a special case for treatment in fact?

It’s as easy as 1-2-3, do re me, abc?

 

At the end of August, this document was published -the latest FSA tome on changes to how financial advice will look post 1st January 2013 and sadly but not unexpectedly disappoints. As suspected by many, and predicted by Lanson’s Richard Hobbs, the MAS is being left to deal with the education process.

But on the plus side, MAS has provided some good clarity on independent and restricted status.

On Restricted Adviser status it says:

Some current IFAs will deliberately choose restricted status. If they are going to do so bear in mind that this doesn’t mean they will be any less professional – they will still need to follow the new rules for adviser charging, exams and professional standing described above. It also doesn’t necessarily mean that the best product for you will not be amongst the products they provide advice on. It simply means that they will be looking at a narrower range of products when considering what’s best for you.

It goes on to say that: “The adviser will need to tell you what ‘restricted’ means in their case – it could be:

  • that they specialise in a particular type of product, such as pensions, or
  • that they are tied to one or more providers and so can only advise on the products of those providers”

For those choosing the Independent route a balance has been achieved that should be applauded, MAS state that:

 “Under the new rules advisers will have to make it clear whether the advice they offer is independent or restricted.

On Independent status it says:

An adviser must:

  • be genuinely independent and free from any influence that could stop them recommending the best product for you
  • make a fair and comprehensive analysis of the relevant products available and recommend what they consider to be a suitable one for you in the light of your circumstances and needs

Any advice that doesn’t meet this standard must be clearly labeled as restricted.

Advisers will only be able to call themselves IFAs if they can demonstrate to the Financial Services Authority (FSA) that they review all the suitable products in a market and give fair, unbiased and unrestricted advice.

Many firms who may aspire to the Independent status will find it a high bar they may not wish or have a need to hurdle. After all it is about what is best for YOUR clients

The restricted model should not be seen as a stigmatization, after all as MAS clearly statethis doesn’t mean they will be any less professional – they will still need to follow the new rules for adviser charging, exams and professional standing described above. It also doesn’t necessarily mean that the best product for you will not be amongst the products they provide advice on. It simply means that they will be looking at a narrower range of products when considering what’s best for you.

It is good to see that some plan of awareness action is starting to evolve; this is in no small part due to the efforts of many as well as ourselves. We met with the FSA and presented our survey findings to them in April. But, is this document really an improvement in clarity?

I think this will be too little and too late. With a little over 111 days to go I think many advisers will be starting to despair that what is being done in the name of the consumer is being so poorly communicated to them by the regulator.

Gill Cardy is on record as saying “it was a major improvement on the FSA’s previous version and showed the regulator had taken industry views to heart…. IFAs must top it up with their own tailored messages to clients explaining their charging structure” and she is right because it is clear the FSA in its dying days will not.

There is some confusion at best and an almost deliberate lack of clarity at worst in the FSA leaflet version 2 published a few days ago that I think really should have been clearer. Section 1 deals with how much advice will cost.

It states: “You may not have realised, but if you have received financial advice you have probably been paying ‘commission’ to your adviser.

This is both surprising and incorrect, providers pay commission and has been a factored and hard disclosed cost for years to consumers.

Section 2 refers to “The differences between these types of advice are known as ‘independent’ and ‘restricted’ advice. See page 5 for more on independent and restricted advice”, yet when turning to page 5, clarification defeat is snatched from the jaws of victory with the statement that:

From 31 December 2012, financial advisers that provide ‘independent’ advice will be able to consider all types of investment products that might be suitable for you. They can also consider products from all firms across the market.

An adviser will have chosen to offer ‘restricted’ advice where they can only consider certain products, product providers or both.

Your adviser will have to clearly explain what they can advise you on”. 

And so clearly the FSA is either unable or unwilling to. This awareness creation exercise could have been so much clearer, after all if the MAS can get it right, surely a bit of co-operation could have worked wonders in preparing the guide

Section 3 states quite correctly that “Some investments can be hard to understand. So we are increasing the standards of qualification that financial advisers have to meet to ensure their knowledge is up to date.

Financial advisers will also have to sign an agreement to treat you fairly.

We will monitor firms to make sure they meet these new standards”.

All good stuff, but this is another opportunity lost as the FSA will not asses the suitability for a ‘recommended product’ to be deemed fit for purpose.

The leaflet closes with some good advice, but only if you have an adviser relationship:

“What should you do now? Before 31 December 2012, ask your adviser how much they are currently charging you for their advice and how much that same advice will cost in the future. They should be able to explain how these changes will affect you and your finances, and whether they will offer independent or restricted advice.

But what if you cannot afford fees or want to pay fees or have no adviser? A mass market consumer in fact.

Well you are really stuck, and that is the last failing in the document, it gives a list of useful contacts but not a reference to Unbiased.

As the song goes “Reading, writing, arithmetic are the branches of the learning tree”.

The FSA could have made the whole RDR consumer awareness process: “As simple as, do re mi. A B C, 1 2 3” but once again did not.