Is there light at the end of the tunnel for financial advisers or is it just another train heading towards us? Past regulators, whether Fimbra, PIA, or the FSA all started off with great expectations, which ultimately ended in confusion for consumers and unsatisfactory outcomes for those they regulated.
Now the FCA, after a less than auspicious first few years, is under new leadership and the key question is, can it at last demonstrate that regulation can deliver the Holy Grail of good consumer outcomes and a vibrant, healthy financial services sector?
The vast majority of financial advisers are already playing their part in delivering good consumer outcomesThe vast majority of financial advisers are already playing their part in delivering good consumer outcomes, and it is time they benefited from the often promised 'regulatory dividend'. I have consistently argued three points in relation to the FSCS.
Firstly, the current funding of the FSCS is grotesquely unfair to the financial advice sector. Secondly, either a product levy or a levy on the funds received by product and investment providers would be both fairer and minuscule in its impact on any single organisation. Thirdly, an added benefit of such a change would be to give providers a direct vested interest in helping to stamp out bad practices and phoney schemes because of their infinitely greater knowledge of the marketplace.
Some recent events have begun to vindicate these arguments, as providers have started to proactively consider client outcomes when accepting business or dubious switching requests. Zurich are to be congratulated on setting up a 'scam line' in conjunction with the Pensions Advisory Service, as are Phoenix for stopping £30m of suspect pension transfers.
There is undoubtedly much more that could be done by providers without jeopardising their relationships with either advisers or clients, and contributing directly to the FSCS would dramatically accelerate this trend for the mutual benefit of all concerned.
I urge the FCA and HM Treasury to ensure that the present FSCS funding review acknowledges the significant enhancement of client outcomes which will flow from providers funding of the FSCS. It will still have a degree of unfairness because it is impossible for the ‘polluters’ to pay, as they have gone bust or disappeared. It will however be the fairest system possible and will at the same time demonstrate to financial advisers that there really is 'a light at the end of the tunnel'.
Ken Davy is chairman of SimplyBiz Group
