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Yesterday’s news, tomorrow’s U turn?

25 May 2011

So RDR is a little over 19 months away. There is growing concern about what consumer reaction will be to what has been done in their name by the FSA. There are only so many high net worth clients out there, what will happen to the mass market advice model, what will happen to the “orphan clients”, will we see the return of the “Man from the Pru” and provider sales forces?

The Financial Adviser edition of 4th March 2010 alerted readers to a then quite astonishing admission by the FSA’s then Head of Investment Policy Peter Smith.

It reported that when speaking at a Chartered Institute for Securities and Investment Private Wealth Management Conference in London, he spoke about the potential for consumers rejecting the big idea about adviser charging and confessed, "If consumers still do not want to engage with it then we probably will have to do something else.”

This really beggars belief. The various discussion and consultation documents have thrown up numerous proposals, many of which have been dropped, reformed or deformed and it is absolutely clear that much RDR directional thinking has been navigation at sea with only a world atlas to chart the way- something that will give a general idea of what landmass is where but zero detail about the hazards presented by the ocean the vessel is travelling on.

This may be acceptable behaviour in regulation-world but let’s not forget that it is the advisers and consumers whose boats could be heading for the rocks

It was clear in 2010 that the regulator failed to understand the psychology of adviser/client interaction. In 2011 it is the same but it has no intention of listening to the responses from experienced industry navigation professionals, providers, lawyers, MPs, trade bodies and of course advisers.

Not content with being the body that was asleep at the helm when Northern Rock slammed into the rocks followed by the rest of the UK banking “Armada” it seems the FSA also wants to be remembered as the quango responsble for the decimation of retail financial services.

With all this in mind, perhaps we should look back to 17th June 1999 and the Commons 1st reading of the FSMA 2000 bill and ask the question, why does nobody in regulation ever learn from it’s past mistakes. The transcript of this debate from 1999, reproduced via this link and kindly researched by Derek Bull where highlighted in red, flags so many issues of concern that were expressed then with the seemingly strange phenomenon of foresight!

Nobody listened then and I am reminded of the quote from the late Bob Monkhouse when thinking about the impact of poorly thought out regulation upon the consumer of tomorrow -  “They laughed when I said I was going to be a comedian. Well, they're not laughing now”.

The industry is not laughing now, neither will the consumer on the 1st January 2013.

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Comments (1)

Yes I agree, it's going to be an unmittigated disaster. The most worring observation I've made on the subject, is that not a single one of my clients is even remotely aware of the cost of charging them directly is going to amount too.

If I sell I a £70 monthly life policy the commission comes to something like £1400. On a £200 monthly pension contribution, £960. But I don't sell everyday -to my loss.

After 10 years in the industry, never once has a client contacted me and requested a pension. How the FSA believes the prospect of paying for arranging one, is going to encourage the publics uptake of such products, simply boggles the mind?

My expectation is it will become like many professions -polarised. Where your advice is sought in one of two circumstances:

a. like cosmetic surgery, wealthy fee-paying, serviced by a small group of speciallists.
b. like A&E, poor desparated souls, serviced by a larger group fighting over the scraps just trying to treat them and street them. A thankless task!

Eventally, most IFA's in the 'b. sector' will realise their clients are earning more than they are! - and with the recession and everything else the shadow of constant rule making by regulation has created - they'll simply give up and move on. The struggle will just become to much.

But if your smart like me, you won't stick about long enough to smell the coffee and get out well before the avalanche with a nice cossey bank job, like me. If the public doesn't have a pension when they retire, that'll be 'Their Problem'. They should phoned when they had the chance : )

John Bull   28/05/2011   15:06

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