The Financial Conduct Authority has urged advisers to back proposals announced this week in its Financial Advice Market Review - but the regulator is offering them very little in return.
Tracey McDermott, acting chief executive of the Financial Conduct Authority, has said the Financial Advice Market Review needs to be looked at as a comprehensive package of measures designed to succeed where other initiatives have failed.
She didn’t come right out and say those failures included parts of the RDR, but earlier this month she admitted the rule change helped create the advice gap FAMR is designed to narrow, as banks fled the market rather than get their salemen in check.
So please Ms McDermott, give advisers some credit.
Unlike your predecessors at the Financial Services Authority, advisers immediately looked at the Retail Distribution Review as a complete package and quickly spotted the strength (increasing professional requirements) and weaknesses (reducing adviser numbers) of that set of reforms.
Advisers have been swift to do the same assessment with the set of reforms recommended by the Financial Advice Market Review and I am sorry to tell you Ms McDermott they are mainly finding the outcome disappointing.
In case you haven’t seen them, the measures are:
1) Narrow the definition of regulated advice so that it is based on a personal recommendation.
2) Support firms developing guidance services that help consumers make their own investment decisions.
3) Extend the work of Project Innovate and establish a unit to help firms develop their automated advice models.
4) Allow consumers to access a small part of their pension pot to redeem against the cost of pre-retirement advice.
5) Improve the existing income tax and National Insurance exemption for employer-arranged pension advice.
6) Review of how the Financial Service Compensation Scheme is funded, which will begin in April.
7) Improve transparency of the processes and decisions of the Financial Ombudsman Service.
However, after consideration of the evidence, the FAMR concluded that relatively few complaints relate to advice given by independent financial advisers 15 years ago or more.
As a result the FAMR has ruled out recommending a 15-year long-stop, as this would “inappropriately limit” protection for consumers on long-term products.
If you really wanted to boost the supply of top quality advisers you needed to introduce a long-stop.Clearly you don’t want advisers to fixate on your failure to introduce a 15-year long-stop but here is a dose of reality for you Ms McDermott delivered by adviser Phil Castle in FTAdviser’s comments section:
“My father had prostate cancer at age 75 and although he has now just managed to turn 85 despite having a TIA just over a year ago but having a clear MRI head scan, I can’t see him being able to handle defending against a spurious complaint about something he did in his 50s and he certainly hasn’t got anywhere to store all the files he’d need to do so.
“As his (joint) representative under an LPA, if he were an adviser, I’d have to try and defend a case I wasn’t even involved in myself.”
Regulators have limited liability. When the Retail Distribution Review dramatically reduced the supply of financial advisers at a time when their services were greatly needed, regulators didn’t have to put their hand in their pocket to compensate individuals they put out of business.
Here is a dose of reality for you regulators and the government: If you had to face being chased for cash over poor rules you introduced until the day you died would you join the City watchdog or work in Westminster?
I suspect you wouldn’t want to sign up to an industry with unlimited liability.
If you really wanted to boost the supply of top quality advisers you needed to introduce a long-stop. End of story.
