A banking morality tale

Panacea comment for Financial Advisers and Paraplanners

20 Oct 2016

A banking morality tale

Wells Fargo Fined $185 Million for Fraudulently Opening Accounts.

The following first appeared in the New York Times last month and showed that old banking habits die hard. In fact the scandal was so great that the US Senate, House Financial Services Committee decided to intervene. 

For years, Wells Fargo employees secretly issued credit cards without a customer’s consent. They created fake email accounts to sign up customers for online banking services. They set up sham accounts that customers learned about only after they started accumulating fees.

September saw these illegal banking practices cost Wells Fargo $185 million in fines, including a $100 million penalty from the Consumer Financial Protection Bureau, the largest such penalty the agency has issued.

Federal banking regulators said the practices, which date back to 2011, reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks. The bank has fired at least 5,300 employees who were involved.

In all, Wells Fargo employees opened roughly 1.5 million bank accounts and applied for 565,000 credit cards that may not have been authorized by customers, the regulators said in a news conference. The bank has 40 million retail customers.

Some customers noticed the deception when they were charged unexpected fees, received credit or debit cards in the mail that they did not request, or started hearing from debt collectors about accounts they did not recognize.

But most of the sham accounts went unnoticed, as employees would routinely close them shortly after opening them. Wells has agreed to refund about $2.6 million in fees that may have been inappropriately charged. 

Wells Fargo is famous for its culture of cross-selling products to customers — routinely asking, say, a checking account holder if she would like to take out a credit card. Regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies that rewarded them for opening new accounts; many current and former Wells employees told regulators they had felt extreme pressure to open as many accounts as possible.

“Unchecked incentives can lead to serious consumer harm, and that is what happened here,” said Richard Cordray, director of the Consumer Financial Protection Bureau.

Wells said the employees who were terminated included managers and other workers. A bank spokeswoman declined to say whether any senior executives had been reprimanded or fired in the scandal.

“Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said in a statement.

One Wells customer in Northern California, Shahriar Jabbari, had seven additional accounts that he did not consent to, according to a lawsuit he filed against the bank last year in federal court.

When Mr. Jabbari called the bank asking what he should do with three new debit cards he did not authorize, a bank employee told him to dispose of them, according to the lawsuit. 

Mr. Jabbari said in the lawsuit that his credit score had suffered because unpaid fees on the unauthorized accounts had been sent to a debt collector.

Banking regulators said the widespread nature of the illegal behavior showed that the bank lacked the necessary controls and oversight of its employees.

Ensuring that large banks have tight controls has been one of the central preoccupations of banking regulators after the mortgage crisis.

Such pervasive problems at Wells Fargo, which has headquarters in San Francisco, stand out given all of the scrutiny that has been heaped on large, systemically important banks since 2008.

“If the managers are saying, ‘We want growth; we don’t care how you get there,’ what do you expect those employees to do?” said Dan Amiram, an associate business professor at Columbia University. 

It is a particularly ugly moment for Wells, one of the few large American banks that have managed to produce consistent profit increases since the financial crisis. Wells has earned a reputation on Wall Street as a tightly run ship that avoided many of the missteps of the mortgage crisis because it took fewer risks than many of its competitors.

At the same time, Wells has managed to be enormously profitable, as other large banks continued to stumble because of tighter regulations and a choppy economy.

Analysts have marveled at the bank’s ability to cross-sell mortgages, credit cards and auto loans to customers. The strategy is at the core of modern-day banking: Rather than spend too much time and money recruiting new customers, sell existing customers on new products.

Wells Fargo markets itself as the quintessential Main Street lender, stressing the value of creating long-term relationships with customers over earning a quick buck.

But that apple-pie approach was undercut, regulators say, by a compensation program that encouraged employees to push the limits.

“It is way out of character for one of the cleanest banks around,” said Mike Mayo, a banking analyst at CLSA. “It’s a head-scratcher why so many employees felt comfortable crossing the line.”

In many cases, customers took notice only when they received a letter in the mail congratulating them on opening a new account.

Many of the questionable accounts were created by moving a small amount of money from the customer’s current account to open the new one.

Shortly after opening the sham account, the bank employee closed it down and moved the money back, according to regulators.

But Wells employees were still most likely able to get credit for opening new accounts in meeting their sales goals, the regulators said.

In addition to the fine from the consumer protection bureau, Wells paid $35 million to the Office of the Comptroller of the Currency and $50 million to the City and County of Los Angeles. The Los Angeles city attorney worked with banking regulators on the case. 

The bank stressed that the refunds have been relatively small — averaging about $25. The bank hired an independent consultant that reviewed tens of millions of accounts from May 2011 through July 2015.

The bank said it refunded money to customers if there was even the slightest possibility they were charged improperly because of unauthorized accounts.

“As a result of our customer-first methodology, we believe we included accounts that were actually appropriately opened and authorized by a customer,” the bank said in a statement.

Even regulators concede that the financial harm to consumers was not large. But the more troubling aspect, they said, was how the behavior reflected a broader culture inside Wells’s retail operations.

“Consumers must be able to trust their banks,” said Mike Feuer, the Los Angeles city attorney. “Consumers must never be taken advantage of by their banks.”

Stock of Wells Fargo, which is the largest bank in the country by market capitalization but fourth-largest by assets, rose 13 cents on Thursday, to $49.90 a share.

USA Today reported that “Wells Fargo CEO John Stumpf has agreed to give up $41 million in unvested stock awards following the board of directors’ investigation into the bank’s sales practices, the company said Tuesday.

Additionally, Carrie Tolstedt,

Wells Fargo’s former head of community banking, will forego all her unvested equity stock awards valued at $19 million and will not receive retirement benefits worth millions more. 

Tolstedt was responsible for the division during the time employees allegedly created sham accounts to meet sales targets. She has announced she will retire at the end of year.

And the footnote to this is that last week John Stumpf resigned with immediate effect. The California Department of Justice has launched a criminal investigation into Wells Fargo.

And while all eyes have been on Wells Fargo in the wake of the bank’s fake accounts scandal, Fortune Magazine notes that “there is another, not so apparent culprit at the heart of the crisis: the U.S. Securities and Exchange Commission.

Under SEC Chair Mary Jo White’s watch, the agency has failed to enforce disclosure requirements at Wells Fargo and elsewhere at a time when trust in big business has hit historic lows”.

And the lesson that UK banks should learn from this is?

And the lesson UK regulators should learn from this is?

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Regulation, will we ever get it right?

mansleepingI had the great fortune to sell my IFA practice 10 years ago, a driver for taking the plunge was that having worked under the ‘control’ of 4 different regulatory regimes- NASDIM, FIMBRA, PIA and FSA, the prospect of never seeing a balance of common sense and fairness painted a very bleak future.

The jury may still be out in that regard, but I think we are at the stage where the Judge may be directing the Jury that a majority decision would suffice.

I am not normally driven to negativity, cynisim maybe, and while I do see an absolute need to have regulation of financial services, it seems to me that wherever there is regulation, chaos and extreme cost is the outcome with blame being laid at the door of the weakest.

Some key facts to digest:

  • Regulation is poorly thought out in just about every industry
  • It is reactionary rather than pro-active
  • It is not always retrospective, although in financial services it seems to be an exception
  • Nobody ever listens to the voice of experience
  • Nobody ever learns from past failings
  • Nobody in regulation admits failure
  • Nobody in regulation takes the blame
  • Everyone in regulation benefits from ‘learnings’ and earnings
  • Regulatory failure is rewarded not punished
  • Regulation is an industry, it is hermaphroditic, capable of self procreation and without something to bash it would have no purpose. As Keith Richards (Rolling Stone not PFS) once said “In the business of crime there’s two people involved, and that’s the criminal and the cops. It’s in both their interests to keep crime a business, otherwise they’re both out of a job.”

 

Regulation should not be pursued at any cost and in such a way, applied like a tattoo only to be regretted when the effect of the alcoholic induced stupor that fuelled its creation has gone away. The NHS is an example of regulation on ‘acid’.

Has the consumer benefited? Many may say no. Access to financial advice for the masses has been exterminated. Even if it was freely available, there is insufficient capacity to service any more than around 10% of the population based on the recent Heath Report and the FAMR will not correct that imbalance as was intended.

In 2009 the great and the good expressed concerns about the impact of RDR and how it will disenfranchise consumers, here but just a few to prove my “Nobody ever listens to the voice of experience” comment

  • Otto Thoresen – CEO ABI, then of Aegon: “The RDR is only helping wealthy customers”
  • AXA April 2009: “We will lobby the FSA to make sure the RDR does not mean less are able to access advice”
  • Institute of Financial Services: “RDR will impair financial advice before improving it”
  • Alasdair Buchanan Scottish Life November 2009: “Sales advice is a real cop out and extremely confusing to investors”
  • Stephen Gay – Aviva June 2009: “The regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes”
  • Lord Lipsey: “Consumers in the middle (not high net worth or money guidance fodder) to be sold products by banks under the contradiction that is sales advice”
  • Walter Merricks former Chief Ombudsman: “I think it would be unwise to count on the assumption that complaints from the retail investment world are suddenly going to go down as a result (of the RDR)”
  • Deutsch Bank report August 2009: “There has been industry talk of 30% or even 50% of IFAs exiting the industry post 2012, which is not impossible”
  • Paul Selly HBOS: “Bancassurers set to benefit”
  • Richard Howells Director Zurich Life June 2009: “The big question mark is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can really hang my hat on.”
  • Martin Lewis Money Saving Expert June 2009: “There’s a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I do hope I’m wrong. I’m not convinced most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash. What I find most galling though is that bank-based advisers – those primarily responsible for PPI miss-selling, endowment miss-selling, investment miss-selling and generally poor advice all round are still to be allowed to be remunerated based on the number of sales.”
  • Janet Walford OBE, Editor Money Management Sept 2009: “I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unintended consequences may well mean that this will be the result. This is especially the case when set alongside the myriad of other proposals that are costing some £430 million to set up, with ongoing fees of £40 million pa thereafter, a mind boggling amount of cash.
  • Peter Hamilton barrister, Source: Money Management Oct 2009, Scrapping the FSA by Marie Jennings MBE: “The Financial Services and Markets Act does not permit the FSA to cancel an authorisation simply because the FSA has changed its views on what the appropriate qualifications should be…. It is one thing to impose new rules for new entrants to the IFA profession, it is quite another thing to disqualify someone who is already qualified.”
  • David Hazelton of Tax Incentivised Savings Association (TISA) 30/10/09: The RDR could be detrimental to consumers both in terms of higher product charges and an increase in the cost of advice, warns the Tax Incentivised Savings Association (TISA). Implementation costs for the RDR are being “seriously underestimated” and product charges will consequently have to be raised.
  • Robert Kerr, head of retail distribution development at Scottish Widows says: The RDR could have the unintended consequence of “disenfranchising” the majority of consumers from financial advice. “Our key concern is the RDR proposals will act to drive advice upmarket, with financial advice becoming the preserve of the wealthy leaving mass-market consumers un-served,”
  • Nigel Waterson MP when Shadow pensions minister: “While no-one can object to raising the standards of training and competence, should an emphasis on exams take precedence over on-the-job training and experience?

Fines are at record highs for the same bad behaviour from the same suspects, regulatory costs are at an all time high, huge FSCS levies continue to hit ‘small businesses’ when least expected, politicians have no control of those they leglislate to regulate, those employed in financial services regulation have increased, those employed in the financial services sector they regulate have decreased.

The problem with regulation in 2016 is that you cannot regulate for lack of common sense, yet that is what we keep trying to do. Caveat emptor has gone.

We have lost the use of that in-built gene of common sense when looking at constructing and applying regulation.. Its loss went along with map reading skills, crossing the road after looking both ways, not talking to strangers, proficient cycling, spelling ability, simple mental arithmetic skills and very many more.

The world has truly gone mad, or at least it has in UKplc’s regulation section.

We have a society that is now readily and speedily offended on somebody else part for just about everything that simply should not matter as much as it does.

We have borders that are not fit for purpose, we have an NHS in meltdown because the service is now aspiration and expectation based, rather than focusing on the basics of it’s original 1948 founding principles (comprehensiveness, within available resources) and a country controlled not by UK based elected politicians but by unelected civil servants, quangos, eurocrats and regulators.

To top that we now have ‘Brexit’.

To borrow that famous Bob Monkhouse quote “ When I said that the proposed RDR regulation would not work, everybody laughed. Well they’re not laughing now.

 

www.panaceaadviser.com

Panacea Adviser survey: 89% of advisers say Robo-Advice is a threat to the industry

Almost nine out of ten financial advisers warn that automated services pose a threat to traditional face-to-face financial advice, research by Panacea Adviser has revealed.

In a survey asking 118 financial advisers whether robo-advice presented a threat or opportunity for face-to-face advice, only 11 per cent described it as a positive for their industry while the vast majority raised concerns that robo-advice could prove damaging to traditional financial advice.

Commenting on the results of the research, Panacea Adviser Chief Executive Derek Bradley, said: “With the amount of attention and industry debate sparked by robo-advice, it is perhaps not so surprising to see such a strong reaction from advisers towards the ‘rise of the robos’. The current mood appears more unusual, however, when you consider that automated services still represent a relatively small market here in the UK while the technology itself is also fairly limited at this stage.

“The US market also offers a glimpse of what looks like a more positive outlook for advisers when it comes to robo-advice. The ability to combine elements of both human and automated advice is actually seeing many traditional advice firms in the US prove more popular than robo-advice models that rely solely on technology.”

ADVISER VIEWS ON ROBO-ADVICE

The research also gathered adviser opinion on both sides of the debate, highlighting some of the key challenges – and benefits – that automated models can bring for advice firms.

Pete Matthew, Managing Director for Jacksons Wealth Management, believes marketing could prove the biggest hurdle for firms looking to adopt robo-advice. He said: “An online service can provide a way of perhaps serving ‘lower value’ clients in the short-term so that they engage with the adviser’s brand, which may well lead to higher-ticket business in the future.

“But while the technology behind robo-advice actually appears to be straightforward enough, the real issue is that most advisers are clueless when it comes to marketing. The world of marketing has changed immeasurably. Now, it is all about providing value to the prospect by educating, entertaining and inspiring clients to take action. The social aspect should not be underestimated either. Increasingly people buy based on the recommendations of social media circles and unless advisers are influencing within these channels, no-one will show up to their fancy robo-advice websites.”

 Alan Hughes, Partner at Foot Anstey LLP, also calls for the FCA to clarify what constitutes ‘advice’ and ‘guidance’ in relation to automated-models. He said: “As robo-advice develops, advisers need to consider carefully how it impacts on the market, what that means for their own business and clients and how they can use this as an opportunity. Robo-advice will never completely replace face-to-face advice but it is a case of “ignore at your peril”.

“Going forward, any further clarity that can be provided on the difference between advice and guidance will be very useful in bringing automated models to market. The FCA should explicitly address these issues and be proactive, rather than just tweaking the regulatory framework and then telling firms that they need to go off and reach their own view.”

Focusing on the regulation of automated services, Derek Bradley added: “A vital UK consideration that would assist in the adoption of robo-advice models is that the FCA approves the technology and their complicated algorithms. Some time taken now could mean that the constant retro aspect of regulation against products or advice is removed and public confidence in a ‘fit to fly’ model will see a greater, quicker embrace by advisers and of course the public.”

 

www.panaceaadviser.com 

Brexit, What next for MiFID?

The Markets in Financial Instruments Directive (MIFID) was an EU regulation initiative that aimed for harmonisation of financial services regulation in Europe’s 31 member states.

The intention was to see increased competition and more consumer protection.

MiFID 1 in EU directive 2004/39/EC was the first step and in April 2014 MiFID 2 was approved that tidied up the original MIFID thinking and by January 2018 MiFID 2 and MiFIR (Markets in Financial Investments Regulation) will take effect.

MiFIR/MiFID II had the potential to boost transparency and increase investor protection and readying the member states for implementation was likely to be a very painful process and no allowance for any transitional stage will make the deadline even harder to meet.

And what about the massive MiFID costs already incurred and about to be incurred by the UK? So far:

  • One-off compliance costs for the UK were estimated to be up to £188 million
  • Ongoing costs from 2017 are estimated to be  between £79.8-£150.4 million
  • The UK will/ would have bear 36% of the estimated total cost of Mifid II
  • Total transition cost estimate is £194.8 million
  • Average annual cost, excluding transition: £112.5 million

*Source: HM Treasury Impact Assessment

Now we have voted to leave the EU, where does the UK go on implementation, almost two years on from when article 50 to leave will have been implemented?

Where does the EU go as the UK market is amongst the biggest of global financial players?

Time for some guidance from the FCA and HM Treasury I think?

Especially as the Stock Exchange is about to be acquired by the ‘Germans’…..or will it now?

The cost of freedom, £900m

The cost of freedom, £900m

In July 2015 it became clear that for one major provider, 70% of savers exercising their new ‘pension freedoms’ withdrew the lot in the first 6 weeks of the so called pension revolution coming into force.

Yet only 3% of those savers who contacted the firm had spoken to Pension Wise!

Panacea predicted that the ‘harvest outcome’ from pension freedoms would be “the next PPI scandal”.

The Government has been giving retirees the freedom to do what they want with their ‘hard-earned’ and those pension reforms and freedoms.

Their road can now be seen as fraught with some very clear dangers and many that are hidden.

Regulation and legislation needs to catch up with the retirement superhighway quickly as I suspect that those retirees who did their Lamborghini based ‘risk assessments’ may expect, but not get, public sympathy after doing something stupid.

Warnings were ignored and the rogues devising cunning plans to no doubt deny many the retirement they have saved for will not care at all about the damage and stress caused by their selfish, boorish, poorly regulated behaviour.

But perhaps the biggest cunning plan has come from HM Treasury who have, we hear, netted £900m in pension freedom tax. This is a third more that anticipated.

They say that wherever there is blame there’s a claim…….

Nationalise financial services?

Nationalise financial services?

We hear that The Competition and Markets Authority (CMA) has announced that energy suppliers will soon be forced to open up their consumer databases to allow competitor firms to offer those on standard variable rate tariffs better deals.

The CMA reckons that some 70% of the great British household ‘consumer collective’ could have been overpaying by around £1.7 billion a year or in CAM speak, consumers ‘could save up to £300 per year’.

That is assuming those consumers really do care, something that may not actually be the case despite the good work of the CMA.

There are many reading this who will have recalled the days when electricity and gas was provided by their supplier, then referred to as a ‘board’. Yes a board, not a company.

Power by way of gas and electricity was ‘homemade’ and the supplier was in fact the government by way of a nationlised utility. The same supply rational applied to water, telecoms, the rail network, health service, airports, air traffic control, the post office, coal, steel…..I could go on.

Without getting too political, nationalised management of utilities, key industries and services was not without its problems and it may be worthwhile to ponder the pros and cons.

And that ponder may induce more than a wry smile

Perceived Advantages

Benefits from economies of scale on the assumption that bigger is definitely better. That should see prices to consumers being relatively lower than if we had a number of smaller privately run for profit firms.

As they are owned, run and controlled by the government, this will stop consumers being exploited. The government can manage the economy better by ‘controlling’ the important utility and key industries. The government can invest money and make those services more efficient. Utilities and key industries owned and run by the people for the people take social costs (pollution, staff welfare, retirement benefits etc.) into account and the profits made go back to the ‘people’/ state.

Perceived Downsides

Low performance when ownership is in the public sector. Managers and employees do not work for profit and so their performance and efficiency has a perceived tendency to remain poor.

Lack of competition that is necessary for development and increasing innovation and production. Nationalisation historically has decreased the spirit of competition.

Favoritism.The management of nationalised industries will provide jobs to their politically favoured few because of government influence upon those state utilities and key industries.

Smiling wryly yet?

I am reminded of a now infamous George Best story about a waiter delivering an iced bucket of champagne to the late, great George Best’s hotel room.

On seeing thousands of pounds of casino winnings along with the then current Miss World both arranged very tastefully on the bed, the scene prompted the waiter to ask, “Mr., Best, where did it all go wrong?”

Some years later Best observed: “Perhaps he saw something in me that I didn’t.”

And that is the analogous point of this whole mess.

De-nationalisation needs regulation, nationalisation does not.

In light of the now completed FAMR exercise and last years FCA suggestion that consumers should be able to view all their lifetime pension savings in one place, would the creation of a ‘Pension Dashboard’ look like the first step toward a nationalisation of the financial services industry in the UK?

Just a thought that may have been missed in the deliberations?

Panacea’s input to the financial advice market review (FAMR)

In November, I was asked by Harriet Baldwin MP (who many may remember came to a Panacea ‘Meet the MP’s event” shortly after her election in 2010) to contribute to the HM Treasury Financial Advice Market Review (FAMR) due to the size, influence and knowledge of the Panacea community.

The Financial Advice Market Review, as you will be well aware, was launched in August 2015 to examine how financial advice could work better for consumers. It is co-chaired by Tracey McDermott and Charles Roxburgh, Director General of Financial Services at HM Treasury.

The meeting with HMT’s Tara Fernando and some treasury seconded FCA officials lasted some ninety minutes where a number of concerns with regard to the five specific FAMR reference sources were discussed for the benefit of the consultation.

There was a great willingness to listen.

It was very clear that there was a considerable lack of understanding around many issues of IFA concern. I think this is because there is a knowledge gap, possibly caused by a failure or desire to fully understand how intermediated distribution works and why. And to understand advice responsibility anomalies such as the current lack of longstop.

It is also clear that regulators do not understand that savings and protection products are sold to the mass market, not actively purchased.

The Treasury and the FCA appear to have no knowledge of the workings or long history of commission payments, the maximum commission agreement or its reason for removal.

You may find the following bullet points with some supporting links, that were the subject of some detailed conversation, to be of interest:

1. The extent and causes of the advice gap for those people who do not have significant wealth or income 

  • Heath Report an overview, access to the report and podcast
  • Commission v Fee the RDR/ GFK report
  • Fees and the post RDR world
  • UK advice & distribution model
  • The FCA was trumpeting the fact that adviser numbers had gone up since RDR and the industry should as a result rejoice.
  • From January 2012 to July 2013 23,406 registered individuals (RI’s) have left the industry and 9,573 have joined.
  • For 2014, 5,979 RI’s have moved firm, 6,799 are no longer authorised and 4,576 have become authorised. Some 17,332 changes in one year and a 2,223 net loss of RI’s. Hardly something to shout about.

2. The regulatory or other barriers firms may face in giving advice and how to overcome them

  • Cost, known’s and unknowns, FSCS funding is wrong, unpredictable and unfair.
  • PI cover, retrospection of regulation makes pricing impossible, a claim makes even getting it a herculean task (air bag analogy)
  • New blood, the aspiration of many to start a new advisory firm has been dampened to say the least. The costs are enormous.
  • FOS perceived bias FOS survey, a link to 2014 survey and to the 2011 survey
  • FOS has no affordable right of appeal, unlike ABTA for example
  • Longstop removal and some other notes on the subject. Regulators today are in many ways a ‘doppelganger’ of the trade unions of the 1970’s, creating unrealistic, restrictive working practices at high cost allowing little or no competition. And we all know how that ended.
  • Many small firms live in fear of the FCA and will not raise their heads above a paparapit to voice concerns for fear of retribution. Very worrying but perhaps ‘Sir Hector’s message was received and understood
  • The ‘Waterbed effect’. It’s effect is the natural but not necessarily intended potential to squeeze one part of a complicated and complex regulated business model (and the attendant regulatory processes) to cause a serious bulge elsewhere in the process.

3.  How to give firms the regulatory clarity and create the right environment for them to innovate  and grow

4. The opportunities and challenges presented by new and emerging technologies to provide cost-effective, efficient and user-friendly advice services,

  • Simplified advice, but what is it- needs defining
  • A solution: to licence a product as fit for purpose, with that purpose clearly defined, as part of the process is the single most effective consumer benefit a regulator could put in place. It is the CAA equivalent of being fit to fly, it is the Food Standards Agency equivalent of safe to eat, it is the VOSA equivalent of saying your car is safe to drive.

5. How to encourage a healthy demand side for financial advice, including addressing barriers which put consumers off seeking advice

  • Consumers should understand that advice comes at a price but that price and the method of how it is actually paid should be determined by the client and adviser firm together and not a regulator.
  • Is commission still a dirty word?
  • Maximum Commission Agreement (MCA) during the 1980s and perhaps earlier there was an apparent unresolved conflict in government policy between investor protection and the belief in unrestricted competition. OFT objected!
  • Pro bono working in IFA firms was the norm in a pre RDR world
  • It is not in a post RDR world
  • The circle game? FSA told consumers advice under RDR wouldn’t cost more. Right possibly, but fewer now have access to it

The review will close on the 22nd December 2015, you have just a few more days to contribute.

Here is a link.