Simoney Kyriakou  

Enough with the one-size-fits-all regulation already

Simoney Kyriakou

Simoney Kyriakou

Financial advisers have every right to be angry at the way things are going.

Professional indemnity costs are rising across the board, while the excess is getting higher and higher.

The levy is rising for the Financial Services Compensation Scheme each year, and the Financial Conduct Authority has announced it is going to increase the award limit payable for successful claims made by the Financial Ombudsman Service. 

Meanwhile, firms involved in dodgy pension transfer deals or similarly unsavoury investment advice are 'disappearing', leaving the rest of the advice industry to pick up the pieces. 

Not since the run-up to the Retail Distribution Review have I seen such genuine anger from advisers, trade bodies, providers and regulatory consultants - all singing from the same hymnsheet, if rage can be classified as 'singing'. 

And they have every right to be. You spend all your time doing things by the book, putting the 'treating customers fairly' principles firmly into practice at all levels of your business, only to find your own business costs increasing and your regulatory responsibilities rising. 

One adviser commented that his small, one-man advisory firm has had to complete the same Gabriel report structure as HSBC - a classic example of a 'one-size-fits-all' regulatory policy that just doesn't seem to fit anybody.

In fact, what all this regulatory tinkering is doing is squeezing many of the good guys out of business, which means the advice gap is only going to get bigger - hardly helping the Financial Conduct Authority's guiding principle of ensuring no consumer detriment.

And when the good guys go, the dodgy dealers will crawl into the breach and try to pick off the vulnerable clients who are at a loss as to what to do with their hard-earned money. More too-good-to-be-true product pushers will be out there and actively seeking the less financially astute.

It's clear that when this happens, neither the 'Find An Adviser' service from the regulator nor the 'beware of scammers' information out there is going to help when consumers, once-bitten, remain twice shy of coming to a genuine adviser for help. 

At the end of the day, it's the consumer who ends up losing out. 

And if the repeated comments from advisers are anything to go by, there are simple measures that could be explored further and put into place in some form or another that would go far in making things fairer for clients and their advisers. 

These are: 

  • A long-stop on the limit for advice.
  • Charging claims management companies every time they bring a case to Fos. 
  • Putting the cost of a failed claim on the CMC and not on the industry. 
  • Creating a more competitive market for PI insurance providers to help bring down premiums.
  • Work harder to crack down on dodgy phoenix directors, making them personally liable. 
  • Bring in a form of product regulation to prevent high-risk products even seeing the light of day.
  • Allow a right of appeal against Fos decisions which are over a certain amount.
  • Make Fos accept hearings, with cross-examination of clients under oath and proper witness statements and disclosure.
  • Allow successful defendants to recover their costs from vexatious claimants.

Of course, knowing how similar proposals have been kicked way past the long grass and into the shady woodland behind, I doubt the regulators will pay serious attention to these nine points. 

But if they addressed even three or four of these in the next 12 months, a lot more industry professionals would feel happier and more secure in carrying on serving their clients.