Bull by the horns

Some see it as yet another attempt of powerful vested interests to gain ground. Others, who perhaps look longer term, realise the current unaccountable regulatory structure is unsustainable and we must bring it under control.

Let us put this into perspective. This review comes as a direct result of the double whammy of the recent pension reforms which demanded an adviser establishment which no longer existed and RDR reforms which had ensured that 13,500 advisers were lost to consumers. The consequence meant advisers still left had halved the numbers of consumers they handled.

This appears to have surprised the Treasury, presumably someone was asleep at their desk. But this was not some unforeseen accident. It was an act of deliberate vandalism made by a regulator who was confident that no one would bring them to account if they pursued their “perfect market”.

There were two opportunities to put a stop to this. On 25 March 2010, the FSA board debated whether RDR should be pulled. It was not because they did not want to “lose face”. The second opportunity was when Martin Wheatley joined the FCA in 2011. He had an opportunity of burying this turkey but again refused to do so.

But there is another opportunity still to come. The plan to remove trail commission next year brings with it the expectancy of another cull. My numbers published in March 2015 (The Heath Report 2) believed between 22 per cent and 44 per cent of advisers are at risk. But whatever the numbers, another loss of advisers is something we can all do well without. We need advisers to pay those FSCS bills, at least in the short term.

Given this advice review, it seems premature to ban a commission when the review may well see the need to reintroduce it in some form.

Some of us requested that the trail commission ban should be postponed a year, this request now seems both timely and reasonable

Some of us requested that the trail commission ban should be postponed a year, this request now seems both timely and reasonable. Before I move onto the opportunities that this new review provides, please permit me the shortest toot on my own trumpet.

Last spring I had a meeting at the FCA and was told that it would be publishing a report in the autumn. I expected a hagiography extolling the beauty of their social engineering.

A handful of people with access to tiny resources took on a multi-million pound regulator and created The Heath Report 1 which postponed the FCA RDR report from September to December 2014. We then published the more heavily researched THR2 (The Heath Report 2) which has been used by policymakers all over the world.

Both reports have been used as ammunition by Treasury Select Committee members and while I would not claim that The Heath Report 2 created this new review it certainly brought the consequences of unaccountable regulation to the attention of politicians and policymakers.

Makes you wonder if we had had more people with more funds how much wider that report might have spread? Toot over - let us get to how we may use this opportunity.

Until this review was announced, we may have faced years of fighting an uphill battle to get change. There is only one thing worse than an opportunity for change, that is: no opportunity.

From the Whitehall perspective regulation has never been about protecting consumers, it is for burying government and regulatory mistakes. What about Equitable Life or RBS or HBoS or PPI or the Pensions Review? Each one can be tracked back to unwise ministerial decisions abetted by poor regulation. All right, those decisions were exacerbated by the industry’s stupidity but the blame should be shared. The current regime makes sure it is not. Whitehall likes the current regime and will try to protect it as will the vested interests that hide in its shadows.

The only people who should matter are the consumers. After all, they are the excuse for the regime to exist so I will put them in the front and centre of all its activity. As agents of the client, we work for the consumer. If it is good for the consumer it will be good for us. We will sit right on top of the moral high ground which is the best seat in the house.

We also need look at costs. Regulation is creating costs well in excess of £1bn a year which begs the question who is protecting the consumer from the regulator? After all, it is the consumer who picks up the regulatory tab.

We need to scale back regulation doing the bare minimum required for consumer protection and we need to find a more equitable way of funding the FSCS. Principally we need a regulator that treats personal provision as essential not something to be discouraged.

Let us be clear. This review will be a battle between those who want to protect consumers, expand advice, increase personal independence and reduce the protection and savings gap and those who wish to continue the current gravy train, expand the influence of big business and make us all dependent on the state for our financial needs.

What challenges does this review present to the adviser community?

Either advisers can unite to use this opportunity to completely reform regulation. To ensure that government policy flies in formation with the 3fs (FCA, Fos, FSCS) and the 3fs fly in formation with each other. The government needs to be accountable to parliament thus avoiding some of the worse abuses of power we have seen of late. That way this can deliver what the government claims it wants, more advice and an expanding sector servicing a widening range of consumers

Advisers have the wit, ability and lobbying power to bring about real change and to make progress. We have done it before and we can do it again.

We fail to unite and in so doing create a self-fulfilling prophesy in which we will see the continued marginalisation of the sector and the slow destruction of the industry.

Advisers have a real chance of making their views heard but only if they stop thinking like hostages and emerge from their Stockholm cells and fight. Candidly we cannot wait while advisers take the next 18 months to scratch their collective bottoms and ponder. We have work to do now.

So what is to be? Another stitch up by the powerful or advisers driving the agenda on behalf of their clients and themselves. Whatever the result, you will be stuck with it for a decade or two.

Can I offer any guarantees? Yes, if you fail to unite and sit on your hands you will lose, guaranteed.

If you unite and stop apologising for your existence; you have a good chance of making real change as there are many in the political sector who wish to help you.

Garry Heath is director general of Libertatem

Key points

The regulator’s review of financial advice comes as a direct result of the double whammy of the recent pension reforms and the low numbers of advisers due to the RDR reforms

The only people who should matter are the consumers

Advisers have a real chance of making their views heard