Mas muddies the water over definition of ‘advice’
While the RDR will prompt a spurious redefinition of ‘independence’, now even the term ‘advice’ seems to be confused.
Intermediaries, and many others besides, reacted angrily last week when the Financial Services Authority released its annual budget requirement for the coming financial year.
Amid a growing cacophony of complaint over recent years over the escalating cost of regulation, the regulator demanded an additional £78m to cover the costs of its operations - a rise of around 16 per cent.
Admittedly this includes a consideration of £32.5m to cover the cost of disbanding itself and relaunching as two separate regulators, but it is still hard to stomach. This is especially the case given the fears among the industry that the reform of the system itself will lead to higher fees over the longer term.
But arguably the portion of the FSA budget that is most inimical to advisers is that which is set aside to fund the Money Advice Service, the government’s consumer finance education body launched in spring 2011 to replace the Consumer Finance Education Body.
What sticks in the craw for most, judging if nothing else by the comments left on some of our stories, is that they are funding a body through fees that operates as a competitor and takes mainstream business away from them. Add in understandable consternation over the level of the fees themselves and you have a recipe for serious disapprobation.
To be absolutely fair, in terms of the increase in budgets Mas did not account for very much, with its allocation ostensibly increasing by around six per cent from £43.7m to £46.3m. There was, however, an additional £40m handed to the service to fund a new face-to-face debt advice programme, but this is essentially distinct from its core operations.
Mas itself rejects any notion that it is competing with IFAs. I spoke to Tony Hobman, chief executive, immediately after the release of the budget announcement and he repeated previous assertions that the service is “absolutely not in any way competing with regulated advice”. Indeed, he even said that it would help to “create a much bigger market for advice”.
Time will tell on that front. What Mr Hobman and his cohorts seem to be oblivious to, however, is the extent to which their use of the term ‘advice’ itself is a cause for concern among intermediaries.
This is not, as some at the regulator might believe, simply vanity or pedantry, it reflects a genuine fear over the confusion that might creep in to the term ‘advice’. Mr Hobman himself peppers his explanation of the service with the term, which he at times seems to use as a synonym for information and at others in its more direct sense.
This is unacceptable. The Retail Distribution Review is bringing in stringent new requirements on advice that will place a far increased burden on regulated advisers in terms of qualifications and in terms of the services they provide. They are also being forced to charge in a different way for this service and thus must prove the value of their offering above alternatives.