John Cowan has admitted the regulator’s decision not to introduce a longstop as part of the Financial Advice Market Review was “really disappointing”.
The Financial Conduct Authority ruled out the possibility of a 15-year longstop in the Financial Advice Market Review (Famr) published in March 2016.
Mr Cowan, executive chairman at Sesame Bankhall Group, pointed out: “We’ve argued now, the financial services industry and the advisory community particularly have raised the standards and they’re really demonstrating they’re doing a fantastic job for the public.
“So I felt there would be a quid pro quo in this, or a peace dividend, shall we say, that might come out in the form of a longstop. So I think the battle goes on to win that argument.”
The advice industry has argued for a longstop as it is concerned over the position of financial advisers, particularly those who were sole traders, in retirement should a complaint arise.
The Financial Advice Market Review concluded a 15-year longstop could limit the protection available to consumers with long-term investment products and that relatively few complaints would be affected by a longstop.
The Financial Ombudsman Service told the FCA the introduction of a longstop would create “operational complexity”.
In a video interview with FTAdviser and Financial Adviser editor Emma Ann Hughes, Mr Cowan was also asked about the FCA’s recent comments on vertically integrated firms, often referred to as ‘one-stop-shop’ companies which provide financial products and advice to consumers.
He admitted while vertical integration was a “controversial subject”, it was not necessarily a “bad thing”.
“There’s been noises being made about looking at vertical integration for some time,” Mr Cowan observed.
“Now I don’t think vertical integration per se is a bad thing. However, I think there’s a need for greater transparency and I think that’s what the regulator will be looking at.”
Firms such as St James’s Place, Standard Life and Old Mutual Wealth all have vertically integrated business models, which means they own and control every part of the value chain, from financial advice to selling products, platform administration and fund management.
They have come in for increased scrutiny, as the FCA’s recent asset management review revealed some concerns about conflicts of interest.
He added: “We know some of the businesses have advice businesses which are losing money, [and] the asset managers are making lots of money, so I think it’s about opening up that whole chain and looking at it.”
Mr Cowan went onto discuss whether he believed the Retail Distribution Review had raised standards across the financial advice industry.
On the subject of robo-advice, he noted, “it’s clear we’re on the cusp of change” and suggested technology could assist.
Click here to watch the first part of the interview with Mr Cowan, in which he discussed how Sesame Bankhall is set to evolve.
eleanor.duncan@ft.com
