Following its 2019 consultation paper: Financial Services Future: Regulatory Framework Review, the second phase of the Treasury’s review into the UK’s regulatory structure will be unveiled in the next few months, according to Pimfa.
Speaking on a podcast with FTAdviser, Tim Fassam, director of government relations and policy for the trade body, said this was an “opportunity” for the UK advice market.
The review will look into aspects such as the checks and balances on the regulator, and how the Financial Conduct Authority interacts with the Treasury.
Earlier this year, the Treasury stated it would consult on its approach to the next phase of the review in the second half of this year, so the consultation is imminent.
Mr Fassam said: “A lot of that may seem technical, and how parliament interacts with the FCA may not seem relevant to IFAs, but this will determine how their overarching strategy operates.
“One of the big opportunities is to find ways of bringing these wider concerns [about the advice market] to the FCA.
“They have to look at what regulation is doing to the wider market, and to the attractiveness of the UK as somewhere to run a financial advice business, and whether they are promoting good consumer outcomes overall.”
Keith Richards, a fellow panellist on the podcast, agreed there needed to be an overhaul of the way in which the UK financial advice market was regulated.
He said it was time to bring about the Financial Advice Market Review 2, and it is this that the Personal Finance Society has been proposing to the Treasury and the FCA during recent meetings.
The chief executive of the PFS said: “It is time for a complete review. If you are a regulator, you should be there to engender trust in the sector you are regulating, not undermine it.
“The FCA has a really important role here, to equally influence the government that it is time for a root-and-branch review.
“We have written to the chancellor; in fact we had a meeting with the Treasury in September to continue that dialogue around the need for FAMR 2.
“We need to engage the government in a much wider debate that incorporates protection and the cost of operation and the barriers to entry.”
Rob Sinclair, chief executive of the Association of Mortgage Intermediaries, agreed HM Treasury needed to consider changing legislation.
He said: “FAMR 1 restricted the scope significantly to pensions and investment advice. If we are going to do this piece of work this time it has to be right across the advice piste, and needs to bring in mortgages and insurance broking.
“It is fundamental that whatever solution we produce out of the back end of this it has to work for every aspect of the advice marketplace, and we have to work together to deliver that outcome.”
Mr Fassam said one had to remember that with the original FAMR, the government’s hands were “tied” because of Mifid II and that directive’s definitions of advice.
But post-Brexit, he said: “There is an opportunity for us to change our rules to suit the UK market so we can think much more broadly about what the right advice market is, for the specifics of the UK market.”
According to the trade bodies, the debates over rising regulatory fees and advisers’ contributions towards the Financial Services Compensation Scheme are only part of the wider problem – that of a “broken system” of regulation that allows more and more consumers to end up falling into the FSCS.
They therefore urged advisers taking part in Financial Adviser’s Keep Fees Fair campaign to broaden their letters out from focusing just on fees onto the wider financial services marketplace, the scope of regulation in the UK and making it work better for consumers.
While the government makes policies that determine the scope of regulation, the government does not set budgets – only the FCA does, which is why some advisers have found their letters on fee hikes have been pushed back by the Treasury.
Gemma Harle, managing director of Quilter Financial Planning, warned that “reviews often focus on the known problems rather than solving the difficult ones, so said it was absolutely key the scope of any review remained fixed on what Mr Richards had proposed”.
Ms Harle urged this to be done with “pace or the market will contract and access to advice will be very restricted”.
This comes as the regulator has seemingly thought again about the way the FSCS is funded and drawn upon.
Back in June, the message from the chairman of the FCA, Charles Randell, was very much that fees would rise and that restructuring the FSCS levy would be too complicated and could take years to do.
But in the intervening three months, coinciding with Financial Adviser’s Keep Fees Fair letter-writing campaign to the Treasury, constituency MPs, the regulators and the select committees, the FCA has issued a call for input on the consumer investments market. That document reiterated that the regulator did not think the time was right to reassess funding structures. At the same time, it did moot the idea of whether polluters could pay more towards redress before a claim has to reach the FSCS.
‘Polluter pays’ is one of the solutions proposed by letter-writers, alongside proposals for a product levy and a market-wide assets-based levy.
However, in its public meeting last week, and the related press conference, outgoing interim chief executive Chris Woolard ruled out a product levy.
Mr Sinclair said: “AMI is disappointed to see the comments attributed to the outgoing chief executive of the FCA shutting off a product levy or alternative approaches to funding the scheme.
“The limited options the FCA has put on the table were debated as part of the last review. Accordingly, it is perverse to see the regulator use that as an excuse to close off debate on wider options but bring back options they dismissed as too complex or costly to administer.
“Hopefully the new regime might bring a better vision that is supportive of the advice community.”
His comments were echoed by Ken Davy, chairman of SimplyBiz, who has also advocated a product levy for many years.
Meanwhile, the campaigns pushing towards parliamentarians to take action continue.
Panacea Adviser has thrown its weight behind a joint campaign from the Impartial Advisers Association along with ‘Financial Planners United’, the group created on LinkedIn, to target the Treasury Select Committee rather than individual constituency MPs.
The new campaign aims to request an enquiry on regulation and its costs. A newsletter promoting this read: “There is one parliamentary body that has oversight and that is the Treasury Committee, which can order enquiries into any aspect of regulation.
“So, we are asking Mel Stride MP, chairman of the TSC, to embark on an enquiry on regulation and its costs.”
Phil Dibb, regulatory consultant and an instrumental member of this campaign group, commented: “From fact-find to sign-up, the regulatory file is about the same for a £20,000 Isa compared to a £250,000 general investment account. Therefore, due to significant FCA/FSCS levies, firms are focusing on the wealthier clients.
“As a result, fewer clients with lower net wealth can access IFA advice. The ongoing suitability checks from Mifid II are also making it unlikely many IFA firms want to focus on ‘foundation’ clients. The advice gap, mainly created by the RDR, is getting wider – it is a real worry.”
The Treasury and the FCA did not respond to an invitation to comment.
simoney.kyriakou@ft.com
