RegulationSep 4 2015

Industry versus the authorities: this week’s news

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Industry versus the authorities: this week’s news

The back and forth between industry and the authorities continued this week on various issues that have rarely been far from our pages recently.

Even with the bank holiday robbing us of a day’s reporting, there was still more than enough going on to squeeze into our round-up of things you need to know:

1. Guidance service should be manned by advisers.

Giving credence to a suggestion made many times by advisers over the last 12 months, the Financial Services Consumer Panel told the Work and Pensions Select Committee’s inquiry on pension freedoms that the government’s Pension Wise guidance service should be manned by pension professionals.

They pointed out the standard of advice may be compromised by the fact while the telephone service, delivered by The Pensions Advisory Service, requires its counsellors to have a minimum of five years relevant experience, face-to-face sessions are organised by Citizens’ Advice, which requires no prior experience, expertise or relevant qualifications.

The FSCP stated: “We believe that the level of service required by consumers in this area can only be delivered by confident, competent, experienced professionals who do not have to rely on a script.

“They need to be as qualified and experienced as regulated financial advisers.”

Hate to say we told you so...

2. Compensation scheme says something sensible.

Another issue which never seems far from adviser conversations is that of the Financial Services Compensation Scheme’s levy, the burden of which appears to fall unfairly on many firms which keep steadfastly on the right side of the regulatory line.

On Tuesday, the compensation scheme’s chief executive backed calls for the calculation to be risk-weighed, ahead of the Financial Conduct Authority’s funding review this autumn, which is set to look at this topic.

“I think one of the complaints that I hear most frequently is from businesses that say ‘we have a very low risk business model and we end up paying the bills for much higher risk businesses’, I think that is a legitimate issue which the funding review should address,” said Mark Neale.

“That is something that I think we should look very carefully at,” he added.

Less talk, more action wanted, would appear to be the reaction.

3. Compromises may be the way to a long-stop solution.

Another long-running saga broke some new ground this week, as the Association of Professional Financial Advisers’ director general admitted that the best way of securing a liability ‘long-stop’ for IFAs would be to opt for an insurance-backed solution.

While there is clear support among Apfa members for a straight 15-year cap on customer come-backs, the Financial Conduct Authority is more likely to lean towards a centralised insurance fund, as was suggested earlier this summer.

Chris Hannant, director general of Apfa, said: “Nothing has been said definitively, because the FCA have their clearance processes to go through, but they have emphasised the statutory requirements to protect consumers and how that [a long-stop] squares with potentially limiting consumer protection. That is the challenge they have.”

4. Complaints handling could be the next big grumble.

Something you may have missed last month - everyone’s allowed a holiday - was the regulator’s new rules on complaints handling, which may make professional indemnity insurance harder to get and penalise those that don’t deal with problems quickly enough.

From next June firms will be required to send all complaints data to the regulator, which will then publish it, so consumers can use it to shop around.

Regulatory compliance specialist AHK warned of the potential reputational risk, which could in turn impact your bottom line.

Alexei Abbott, director at the law firm subsidiary, commented: “First there is the administrative and reporting burden, the FCA expects you to get it right the first time and it will cost more if it does go to the Fos.

“Then there is the issue of how consumers will use the data, will they rate advisers accordingly?”

Just in case you needed another thing to worry about...

5. Peer-to-peer gets Sipp market talking.

And finally, something a bit different, as one bullish peer-to-peer lending provider’s pronouncements has got the self-invested personal pension industry going.

Yesterday, Ratesetter’s senior commercial manager Ceri Williams told FTAdviser that in just the last three weeks around £350,000 worth of Sipp money, across several trustees, has been lent via the provider, although all of this has come through the non-advised route so far.

He admitted that trustees overseeing Sipps have also taken time to warm to P2P products, but his firm has already signed distribution agreements with a couple of providers, enabling customers to lend within their pension tax wrapper.

Sipp industry experts were quick to warn that P2P is still in its infancy and providers will have to do their due diligence to stay on the right side of the FCA’s non-standard asset rules.

Martin Tilley, director of technical services at Dentons Pension Management, went as far to say that P2P lending looks ripe for mis-selling, with a “potential disaster” in the making for all but sophisticated investors.

You have been warned.

peter.walker@ft.com