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

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RDR learnings

At the beginning of August, the ‘You could not make it up” season got well underway with HM Treasury and the FCA launching a review to examine how to plug the advice gap (their own regulatory actions had caused). Well, they missed that last bit out in the announcement.

Anyway, a week or so later we learn that US regulators are/were in discussion with the FCA with a view to learning from the UK’s experience of implementing the RDR reforms.

It would also seem that in 2010, the FSA and FINRA (who regulate US brokers remunerated by commission) entered into a memorandum of understanding to support more robust co-operation between the two regulators.

Really? I am not sure what the reverse of that statement around “America sneezes and the UK gets the flu” is?

But if ever there was a better example of messed up regulatory thinking and political miss-management around the “learnings” part, the lead up to RDR in the UK and the resulting advice gap we have today, this is it.

We hope that America listens and learns where our regulators did not.

Here is an adviser “must read” for 2015, we highlighted the well warned of failures that RDR would produce over 5 years ago.

May I rewind you to the 19th July 2010 for a ‘told you so’ history lesson on the route map to statements emerging last week surrounding the success of RDR.

And the US regulator is asking the FSA to share learnings? How can anyone learn if the knowledge giver does not listen?

My observations in 2010, parodying the late, great satirist Peter Cook, in ‘Derek and Clive’ conversational style with Hector Sants, Martin Wheatley or George Osbourn on the subject still stands “ is this any way to run a ******* ballroom?

 

www.panaceaadviser.com

Simplified advice or simplified solutions

Kelly Johnson, lead engineer at the famous Lockheed Skunk Works, coined the acronym KISS.

Whilst today it translates as ‘Keep it simple stupid’, the principle was best illustrated by the story of Johnson handing a team of design engineers a handful of tools, with the challenge that the sophisticated jet aircraft they were designing must be repairable by an average mechanic in the field under combat conditions with only these tools.

Hence, the ‘stupid’ refers to the relationship between the way things break and the sophistication available to fix them when it happens.

As a country, UKplc has moved away from the manufacture of goods and products heading instead toward the manufacture and provision of intangible goods and services.

Financial services is often collectively referred to as an industry. Distribution was seldom linked to a profession, until the RDR arrived, and the industry is made up of many different “manufacturers” (providers) and distributers large and small.

Often very similar, intangible products have been designed to address a vast array of perceived financial needs or problem solving solutions for both personal and corporate consumption.

But in the brave new world of post apocalyptic RDR, the delivery of consumer friendly, understandable, simplified advice (to those consumers disenfranchised by adviser segmentation as being not cost effective to service) that could lead to a transactional outcome online is being thwarted by the very thing that should make it simple.

Regulation.

It is a fact that any ‘industry’ that “designs and manufactures” products have done so because it has identified a consumer need, or at least thinks it has. In doing so it then needs to create awareness of what it has made – and to find a way of getting it distributed. That still often means finding a sales force or in our more technologically enlightened times an easy way for somebody to buy it.

Online?

Indeed, obviously simple and there are so many ways to achieve the awareness and understanding with technology to enable the ‘shop’ button to be hit.

Video linked to free internet research opportunity and understandings can have a big impact in gaining better informed, engaged and protected consumers.

There are some 340,000 years of video watched globally online every day. 68% share their viewings and for firms that have video embedded on their site relating to a product or service, 88% of visitors spend more time on their site.

Consumers who watch a product video are 85% more likely to buy it. The phrase ‘what goes on in Vegas stays in Vegas, but what goes on in YouTube stays on Google forever’ is a great reminder that a compliance trail is nicely dealt with at the same time, no more ‘he said, she said’.

Simplified advice is possible, maybe a starting point would be inventing a different descriptive such as “Simplified Outcomes” or ‘Simplified Solutions’?

And to make this work, a set of plain English protocols should be put in place that simplifies the regulation and responsibility for “Simplified Outcomes” or ‘Simplified Solutions’, placing a consumer looking for low cost financial ‘understandings’ in an informed space, able quickly and easily to make a good decision and purchase while at the same time ensuring understanding they have an element of responsibility for their choices.

Steve Jobs said “We made the ‘buttons’ on the screen look so good you’ll want to lick them”.

As an industry, that should be our target, to get attention, to create confidence in the end user.

How can this be achieved though when the existing lines between advice, product and who is responsible are blurred when it suits?

Well, as a start, all manufacturers of financial services products should be required to have the product they “manufacture” certified or licensed as fit for “Simplified Outcomes” or ‘Simplified Solutions’ delivery in a clearly defined set of tick boxed financial planning circumstances and licenced accordingly- by the regulator.

 

The outcome of this would be that those not able to afford fees will know that “Simplified Outcomes” or ‘Simplified Solutions’ to satisfy their needs can be wrapped up in a recommended packaged product that has been deemed fit for that purpose by the regulator.

The word ‘advice’ must be removed from the process to make this work.

The regulator would carry responsibility for what it is regulating in the “Simplified Outcomes” or ‘Simplified Solutions’ space, creating the simplicity bit, unlike today. We would then see an end to the possibility of inappropriate or faulty products being sold or bought for the wrong reasons to the wrong people.

After all it seems crazy that in today’s regulatory world (where cars cannot get on the road, planes cannot fly, drugs cannot be consumed without a regulatory body certification that they are safe to drive, fly, inject) regulated products, funds and schemes are not licensed as fit for a particular, even specific purpose and instead often deemed unfit for purpose after the event because of perceived miss-selling, miss-understanding or miss-buying.

Can the FCA embrace KISS, well let’s see?

www.panaceaadviser.com

Longstop matters – who cares

I exchanged some tweets, phone calls and e-mails over the last few days regarding the e-petition for Fair Liability for Financial Advice –http://epetitions.direct.gov.uk/petitions/52958.

This is an excellent initiative started by Helen Turner at Tenet, an initiative that really deserves support. But, the e-peitition expires on the 23rd July and I am very concerned that only 6,402 have signed this at the time of writing. Helen’s target is 10,000.

It may be that RDR has dulled adviser sensibilities but for goodness sake, when will the realisation dawn that the continual refusal to reinstate the longstop by the FSA and the current FCA position of ‘willing to discuss’ will probably see the same ‘outcome’. No longstop in place.

APFA is keen to be seen as having succeeded in getting the FCA to conduct a review of the longstop but many advisers would see this as too little, way, way too late. Additionally,those in APFA leading this campaign need to have a rethink about strategy and unless you advisers start ‘stamping your feet’ in greater numbers, nothing will ever get done.

I think regulator attitudes over many years and from many regulators has confirmed that with 20% plus reductions in the adviser community, linked to very poor trade body leadership over many years, a singularly consistent willingness to ‘capitulate’ on the longstop and other key issues by successive APFA and AIFA leaders, regulators past and present see advisers as weak.

And with a weight of a regulatory induced loss of trust seeing public opinion supporting the concept that anyone in financial services is a ‘villain’, they can ride roughshod over a decent group of highly regulated people concerned about their livliehood and future security, especially in retirement.

APFA have a meeting with the FCA soon on the longstop. Despite earlier reports to the contrary, Alan Lakey (the only APFA council member with actual detailed knowledge, understanding and experience of fighting the longstop) has now been invited by APFA to attend that meeting however we do not of course encourage blows to be exchanged.

Such a meeting is a good sign in some ways, but given that the definition of a pessimist is simply a well-informed optimist, I would take the view that the result will be a reworking of old arguments. That is that unless the reinstatement of the longstop can be proven to have no consumer detriment…well you know the rest.

There is a sense amongst many advisers that by simply being a limited liability company or partnership this provides protection from stale claims. I would suggest that advisers think again. A substantial stale claim, or a number of them, if successful can put your limited liability company out of business. And given that ‘phoenixing’ is a thing of the past, and the FSA and now FCA see liability and responsibility falling upon controlling individuals in certain instances, you should, in ‘Hector speak’ be very afraid.

The point is clear about the longstop, in fact follow this link –http://www.panaceaadviser.com/main/p20.php?cx=014967606690113664965%3Aghrmkhjba3a&ie=UTF-8&q=longstop&search=go- and you can see how much involvement we have had in the campaign to reinstate.

The Limitations Act should apply to all citizens in this country, not an ’Animal Farm‘ version. And only Parliament can act to either impose or remove protection from the law. In not referring to a removal in FSMA 2000, Parliament did not remove it, as the regulator would suggest it did.

Barrister Peter Hamilton summed up the whole lack of longstop position very well as follows: “Thus, under the law, I know in advance where I can and cannot park my car. But if I could park only where some official specified after the event, I would have no right to park at all. Similarly, if my right to my possessions is watered down to mean only a right to hold them until the FOS decides it is fair and reasonable for me to pay them to somebody else, then I have no ‘right’ in a true sense to my possessions at all. This conclusion is reinforced by the fact that there is no appeal and the fact that any judicial review of a FOS decision on the merits of a case is, for all practical purposes, impossible because of the vagueness of the subjective (‘in the opinion of the ombudsman‘) fair and reasonable criterion”.

The e-petition needs 100,000 votes to get a debate in Parliament, which is unlikely however 10,000 would be noisy. In addition to a successful judicial review being granted or a case going to the European courts, this is your opportunity to begin the fight back.

Sign now, or as they say, forever hold your peace…and suffer the consequences.

www.panaceaadviser.com

How much is that doggie in the window?

So, three in four firms failed to provide the required information on the cost of advice.

There has been much focus on the restoration of trust in financial services and it would not be unreasonable to assume that clarity on the “how much” bit could be seen as a cornerstone. The FCA is looking at how this is explained or quantified by advisers. The advisers may be looking at it from a client querying perspective as in explaining  “how much” and why!!!!!!?????

FCA research around clarity over advice has really caused a stir with firms failing to give clients clear, upfront, generic cost information  give clients clear confirmation on how much advice would cost or give additional information on charges and that they may fluctuate.

Additionally, a third of firms offering a restricted advice model were being unclear about the restriction and for what. service were not being clear they were restricted, or indeed the nature of the restriction, and a third failed to give clear explanations of fees for  ongoing service as well as their rights to cancel.

Clive Gordon, who we met with in March and is FCA Head of Investment advisers and platforms said: ‘the findings demonstrate a lack of engagement by the majority of firms. In the July [2013] document we put out good and bad practice because we have done research on industry engagement and the industry likes that. We also distilled down the key messages in a two-page factsheet.

‘We have been engaging with the industry but I think the results we are publishing today just how that the vast majority of firms have failed to engage with that.’

I think that what we found out at our FCA recent meeting is that advisers see ‘regulation speak’ as something that is directed at them rather that toward them. On the regulator’s side, they see that the issuing of a document riddled with regu-speak is sufficient to have made everything very clear indeed.

If this is a failure of either side or both it needs to be addressed. But is there a deeper-seated problem, in Churchillian speak, a version of “”two nations divided by a common language“?

In this case the mighty USA being represented by the FCA (what a thought) and the advisory community being Britain?

As Lee Werral, the Compliance Doctor at Compliance Conslutants observed:“Advisers have had 25 years of regulation and point of sale disclosure and still cannot seem to understand that you have to declare what you are going to charge and why, and what the ongoing charges are and why.

Many still use the excuse that they don’t know what size of assets/funds etc that the client holds – so my question is, why are you discussing prices without having a conceptual agreement in the first place? Surely the initial (free) interview is to establish this, but IFAs seem to, as they want to “compete on price alone” still want to compare themselves against others in the area. 

Most professional salesman understand that you need to get a conceptual agreement from the client, a full understanding of their goals and aspirations etc before you can provide a true cost – one which adds value to the client.

Yes, a menu of charges is a good idea (typical costs) but this can be sensibly constructed without committing the adviser to any specific combination until the fundamental needs have been established. If advisers want to advertise themselves like a Kebab Shop and fail to constructively inform the clients what the charges are and why the charge is being applied, or what they will get out of it, then they deserve to be referred to enforcement.

Part of the problem is that many advisers still see that they have to get their 3%/5% or whatever from pre-RDR days into a post RDR fee. Frankly, the world has moved on. Yes, you can quote me on any of that.”

A year ago we highlighted concerns that regulation regarding the various FCA diktats and tomes reckoning that they would benefit from being put intoplain English. 

Here is a great example of FCA ‘clarity speak’ “Behavioral biases can render regulatory interventions aimed at addressing information asymmetries harmful”. And that means?????

On Clive’s own admission, perhaps they need to look more closely at how they communicate and on what frequency. If that was better and structured in such a way to influence “understandings of the common man’, we may see a dramatic reversal in this disturbing trend.

As a point of interest, there are many financial organisations who have beenawarded the Crystal Mark by the Plain English campaign.

The FCA does not seem to be on the list, that may be a good point for them to start their ‘clarification works’.

 

www.panaceaadviser.com

Trail matters & FCA meeting

Following our recent survey on trail and the snapshot poll we did late last year, I can report that we have now had a meeting with the FCA to discuss adviser concerns.

The meeting took place with Clive Gordon- Head of Investment Advisers & Platforms Supervision, Richard Taylor- Savings, Investments & Distribution Policy, Risk & Research and Michael Newton from the Long Term Savings sector.

It is interesting to note that Richard is tasked with looking at unintended consequences of RDR. He did a lot of writing during the session.

From our corner, we had Garry Heath, Lee Travis from NMBA and Sarah Paul and myself from Panacea Adviser.

Sadly we only had one hour of time allocated by the FCA but I do believe we did get some of their attention around a number of key issues. I attach a copy of the mail I sent to Clive Gordon that will assist in ensuring that as many concerns as possible can be looked at.

In particular we wanted to ensure that there was a clear understanding of what trail actually is, what it means and why it is so important, especially to firms with many years in business.

We wanted to ensure that trail from legacy products was not removed and that some clarity was given around this subject as it is the view of many that it is only a matter of time until either the regulator or the providers remove this.

The FCA sees trail as being something that should see an ongoing service, this is not necessarily contractually the case with legacy trail, especially where firms did not take initial commission although some purists may take a very different view.

It would be fair to say that many of the possible consumer detriment issues we highlighted had not been seen until now.  Neither had the impact that removal may have on the viability of adviser businesses as well as the almost complete destruction of embedded value being amongst them

Garry made some very powerful representations based on his current and past experiences and was rightly critical of APFA, who many see as not having stepped up to the plate when it was most needed.

Strangely, the FCA don’t believe it is their responsibility to help advisers communicate to clients the impact of regulatory change but accept they need to more clearly communicate to advisers and accept that there can be confusion with clarity of some of their communications with the caveat that some empirical proof should be provided where possible

We agreed a number of steps need to be taken, Clive was very keen to make the point that the FCA was not about to unravel RDR, and that they would not guarantee that they would make any changes in regard to concerns around trail removal…… but they did say they would listen, and would want to meet with us again on a regular basis.

And that is a starting point.

They also made it clear that they want to move away from FSA way of doing things.

Actions to follow will include working with the FCA to create an adviser guide around trail matters, because trail matters a great deal.

 

www.panaceaadviser.com 

The ballroom has shut

Over a year after the retail distribution review has had a chance to bed down in the industry, the key “learning’s” (my favourite ‘hot’ regu-word of the moment) in this industry are that:

Politicians just talked
Trade bodies spoke out
Lawyers spoke out
Leading industry figures spoke out
Experience counts for nothing
Foresight is a dirty word
In fact vast numbers talked about what was wrong with RDR, especially for their clients- the all powerful consumer- before it even started.

The FSA did not listen
The FCA still do not listen
Hindsight is the only game in town even after foresight advice given
MP’s have no power and accept no blame, not even Mark Hoban
Costs continue to rise,
Mass market consumers have been seriously stitched up by regulation meant to be in their interest
Nobody has the power, will or ability to stop this runaway train doing even more damage it would seem.
May I rewind you to 2010 for a ‘schadenfreude’ history lesson on the route map to statements emerging last week surrounding the success of RDR.

Despite Hector Sants stating at the FSA AGM in June 2010 that the then, very cheaply priced £430m RDR would go ahead (the cost of implementing the RDR could reach £2.6bn. This included “up to” £1.5bn in one-off costs, plus “up to” £233m in ongoing annual costs) the FSA considered scrapping the retail distribution review at a board meeting in March that year but decided to push on with plans for fear of “losing face”.

That was according to Lansons director of regulatory consulting Richard Hobbs speaking at a conference in London, who claimed that the FSA was “not particularly proud” of the review.

Many years before RDR, leading industry figures made very clear their views on what would happen, you would think that they would have been listened to and past regulatory mistakes avoided as a result :

Otto Thoresen – CEO Aegon, now with the ABI, March 2009: “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”

David Cox – Suuqea March 2009: “Two million clients could be left without an IFA after RDR – 40% could leave the industry”

Institute of Financial Services June 2009: “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 – then with 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 November 2008: “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, the current distinction proposed by the FSA is “devoid of meaning” and “nonsense language”

 

Walter Merricks former Chief Ombudsman 16 July 2009: “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”

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.”

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.

Bankhall managing director David Golder 03/11/09: “We say write to the regulator, write to your MP. Do not let the FSA get away with some of the things that will lead to the widespread decimation of our industry.”

Robert Kerr, head of retail distribution development at Scottish Widows November 2009: 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 when Shadow pensions minister November 2009: “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? Is the 2012 implementation date practicable given the extra qualifications and changes in systems that will be required to be in place?

Richard Hobbs Director Lansons Regulatory Consulting 16/07/10: “I have to say, it (RDR) only just survived an executive committee meeting in March 2010 at the FSA. The FSA are not particularly proud of the RDR but it is a question of losing face, so I think they will carry on.”

So it will come as no surprise to the above and the vast majority in the financial services industry that research fellow Michael Johnson from the Centre for Policy Studies reckons that the RDR has been an “absolute disaster”.

We should remind ourselves that the six pillars of Callum McCarthy RDR wisdom were:

• an industry that engages with consumers in a way that delivers more clarity for them on products and services;

• a market which allows more consumers to have their needs and wants addressed;

• remuneration arrangements that allow competitive forces to work in favour of consumers;

• standards of professionalism that inspire consumer confidence and build trust;

• an industry where firms are sufficiently viable to deliver on their longer-term commitments and where they treat their customers fairly; and

• a regulatory framework that can support delivery of all of these aspirations and which does not inhibit future innovation where this benefits consumers.

Only professional standards have been achieved, and even then for the average guy in the street, that really means nothing.

I think that politicians of all parties should seriously examine their role in this whole sorry affair, along with consumer groups who were so intent on seeing change for the better that they could not see or prevent it getting hijacked by self serving, money no object, regulation.

The ‘outcome’ (another favourite regu- word) from their labours has been that the industry has been decimated, businesses and jobs lost, massive amounts of cost incurred, innovation gone and above all the average guy on the street has lost access to simple financial advice because the pillars of wisdom and experience could no longer support the weight of the poorly designed regulatory roof placed upon them.

Michael Johnson’s ‘absolute disaster’ seems to sum much of RDR up quite perfectly. Where we go from here, and whether there is any chance of those in power learning from their mistakes is, unfortunately, a question to which I’m just not sure there is an absolute answer.

The late satirist Peter Cook might have conversed with Hector Sants or now even Martin Wheatley on the subject as follows “I said to him, with all the dignity I could muster, is this any way to run a ******* ballroom?

I must confess that I wrote this with a heavy heart. Advisers have seen, like me, five regulators in the last twenty-five years- NASDIM, FIMBRA, PIA, FSA and now the arrival of the FCA.

Yes, an average lifetime of five years per regulator and despite the huge costs they all have incurred on those they regulate, they never, ever seem to get it right. And the next regulator is coming down the tracks from Euro-land soon I am sure.

There is a big problem for mass-market consumers with RDR despite denials by some.

Until the regulator agrees there is a problem, the big question is around how can we find a solution?

What would that solution be, someone please tell me?

 

www.panaceaadviser.com