A withdrawal from the European common market could free UK financial services from irrelevant rules, but is unlikely to result in lighter regulation, industry representatives have warned.
Some believe a "hard Brexit" could allow UK firms that trade domestically to drop awkward and complex European Union directives such as the packaged retail and insurance based products, or Priips, regulations.
Speaking to FTAdviser, Aegon UK's public affairs director Steven Cameron said the provider would favour what he called "twin track regulation".
"Those who want to sell into the single EU market should of course have to comply with EU regulations, but for those who are selling solely into the domestic market, in an ideal world they would be subject to regulations appropriate only to that market," he said.
He added: "I’m not saying the regulations would be weaker, I’m saying they’d be more tailored to the UK."
Mr Cameron highlighted the Priips rules as an example of EU regulation that was difficult to interpret and often irrelevant to UK products.
"Take Isas. You can’t buy an Isa if you’re in another EU country, so why on earth should Isas be part of Priips regulations, which are all about comparing products across Europe?” he said.
He added that the Priips rules were so complicated, often two experts "could come to very different conclusions as to what it means".
Chris Hannant, director general of the Association of Professional Financial Advisers, also welcomed the prospect of regulation being more tailored to UK needs. However, he doubted that it would lead to lighter regulation.
"It would be great to have more freedom," he said, but feared the FCA would not necessarily take advantage of that freedom.
"We have a fairly detailed and complex regulatory structure, and I don't see that disappearing overnight. If you gave them [the FCA] a blank piece of paper, we'd still end up with a rigorous rule book."
He said advisers would like to see changes to a "good chunk" of the EU's "regulatory edifice", citing the Mifid II directive requiring advisers to tape all telephone conversations as one example - a rule he described as "unnecessary".
He said that, given very few advisers had overseas clients, the impact of a hard Brexit on the advice industry would not be significant.
However, he added that all these questions were "quite far down the track", and what was needed first was a "steer from government".
Since Parliament returned from summer recess, the government has increasingly hinted it would opt for a 'hard Brexit' that would include withdrawal from the single market.
On Sunday (2 October), prime minister Theresa May announced the government would trigger Article 50 - the official notification of Britain's decision to leave the EU - by March 2017.
Her accompanying commitment to a "fully independent, sovereign" Britain was read by many as a clear signal the UK would leave the single market.
On Thursday (29 September), International Trade Secretary Liam Fox made a speech in which he stated a post-Brexit Britain would be committed to free trade, but in the context of the World Trade Organisation rules rather than the EU.
The industry has begun to respond to these hints. On Friday (30 September) the Association of British Insurers (ABI) issued a five-point wish list, in which it listed "pro-UK" regulation, continued European passporting rights, data protection, easy cross-border movement of skilled labour, and strong international trade deals as top priorities.
Alan Solomons, director of Alpha Investments & Financial Planning, said he hoped the regulation of financial planning would "become more sensible and less heavy handed over time" outside the EU, adding: "I don't think the EU has the same experience as the UK regulator."
He said EU regulations had a tendency towards "crassness". He gave the example of a rule requiring all EU residents to receive financial advice from a Mifid-compliant adviser, even if their investments and their adviser were not in the EU.
However, he said he did not expect a hard Brexit to result in significant changes to the financial advice industry.
james.fernyhough@ft.com
