This week the major news stories in the advisory sector have been based on what we now know we do not know, ranging from regulatory obfuscation to hackneyed debates over the viable size of the UK’s advice population.
Would you credit it?
The most hotly debated story on FTAdviser this week was our revelation on Wednesday that both the incumbent consumer credit regulator and its soon-to-be successor have no real idea which advisers require a consumer credit licence.
Prompted by a chorus of confusion on a thread in an advisory forum - itself precipitated by the Financial Conduct Authority sending out the first wave of bills for interim consumer credit levies for when it takes over regulation of the sector in April 2014 - FTAdviser asked the City watchdog when advisory activities would trigger the requirement for a licence.
The response was less than useful. Any adviser involved in mortgages or debt advice was likely to need a licence, it said, but for specifics we would need to speak to the existing regulator, the Office for Fair Trading. In short the FCA said: “If you had a licence with them, you’ll need one with us”.
Great. So we spoke to the OFT - and not for the first time this year. It said advisers might need one, but the licences are decided on a “case-by-case basis” and there is “no one size fits all answer”. In the end they simply said advisers should seek “legal advice”.
Moreover, judging by the comments on the story many are not even clear on which mortgage activities, for example, might trigger the need for a licence - residential first-charges mortgages don’t seem to count, but buy-to-let and remortgages do? And when the hell is one officially providing ‘debt advice’ when all advisers would touch on this if it came up with a client?
The situation seems to me to be a complete farce - and the fun doesn’t stop there, either.
Those interim charges - £150 for a sole trader and £350 for “most other firms” to get a licence to October 2014, when you’ll have to pay again to get a full three-year licence - are being levied despite many advisers having already paid to get ‘lifetime’ cover with the OFT.
The OFT has not yet confirmed if it will rebate for this egregious ‘double charging’. Doing so would at least be a start to ameliorating advisory discontent.
Back in the RDR
On the back of this, yesterday (25 July) the FCA published the findings of its first thematic review into Retail Distribution Review compliance among advisory firms in the first six months post-implementation.
In a paper that struck a truculent tone, the FCA detailed a number of common failings, but what struck me most was the fact that most of these perceived aberrations related to areas where the rules were so ill-defined that failing to meet them was inexorable.
The FCA criticised restricted advisers for not using the term ‘restricted’ when describing their services - it has never stated in rules that I can find that they need to - and castigated independent advisers for using a single platform for the majority of business - it’s rules explicitly stated this was possible, merely that proving independence might be tricky.