29 Apr 2013
Please forgive me for seeing some similarities between the recently discovered post RDR adviser number fallout, the pre RDR divisions of the anti and pro RDR lobbies, the so called silence of networks, AIFA (APFA) and the Highland Clearances.
For those who do not have a knowledge of the clearances, they were forced displacements of the population of the Scottish Highlands during the 18th and 19th centuries that led to mass emigration to the Scottish Lowlands, coast and the North American colonies.
The clearances were part of a process of agricultural change throughout the UK but were particularly notorious due to the late timing, the lack of legal protection for year-by-year tenants under Scottish law, and the abruptness of the change from the traditional clan system and the brutality of many evictions.
The reality of the highland clearances can still be seen today in the remains of burned out blackened houses, frequently comprising of whole villages and settlements standing as a testament to the greed of the few in hurting the many.
It is worth remembering, too, that while the rest of Scotland was permitting the expulsion of it’s Highland people, it’s ruling classes were forming the romantic attachment to kilt and tartan that scarcely compensates for the disappearance of a Highland race to whom such things were once a commonplace reality. The chiefs remain, in Edinburgh and London, but the people are gone.
So we now have confirmed that advisers operating on the first day of the RDR have reduced by 20 per cent compared to December 2011 figures.
These were the first comprehensive figures on post-RDR adviser numbers confirmed by data submitted to the FSA by adviser firms showing that “the total number of retail investment advisers fell 23 per cent from the 40,566 estimated by he FSA at the end of 2011 to 31,132 at the end of 2012, the first day of the RDR”.
With all this in mind, it was with some interest that I re-read an article from 23 November 2010 reporting that (according to the now ‘Sir’ Hector Sants) that “losing up to 20 per cent of IFAs was an acceptable cost in order to deliver the specific improvements brought in by the RDR, according to the FSA”.
In giving his evidence to the Treasury select committee, the yet to be knighted Hector Sants said, “If the reduction in advisers was not acceptable the reforms would not be going ahead”.
To top this it was reported that Lord Turner reckoned that a “reduction could be good news for consumers who may see a reduction in administrative costs”.
He said: “Some exit of “capacity” from the industry which is therefore an exit of administrative cost may be in the interest of consumers, it a cost which is being absorbed.”
What he actually meant was job losses, certainly not FSA or FCA job losses. And along with the loss of livelihood for advisers and providers support staff and paraplanners, we are now seeing the results of ‘survival segmentation’ manifesting itself in consumer disenfranchisement- the unintended but sadly expected outcome of RDR.
Lord Turner, please understand, that advisers of all persuasions - tied, bank, restricted, independent, that the FSA regulated, (and now the FCA) are people, not “capacity” and their clients were often the mass-market consumer!!
Was this ‘newspeak’ use of words like “capacity” a nicer way to describe casualties of the unintended or perhaps intended consequences of regulation? Is “capacity” the FSA/FCA equivalent of “friendly fire” instead of "shot dead" by your own side or “rendition” instead of “kidnapping”?
By the way, was this the same Lord Turner who once said that FSA fee increases were a one-off and the industry will not face further rises for the supervisory enhancement program in the future?
Speaking at a previous FSA annual public meeting, Turner also said: "The Supervisory Enhancement Program involves investment, which means higher cost, which means higher fees. The executive and the Board of the FSA are very focused on ensuring that, after a one off increase in costs to achieve this investment, the industry will not face relentless rises in future. But we cannot avoid the one off increase: in the past, in relation to our highest impact firms, we were trying to do supervision on the cheap."
Is this the same cost conscious Lord Turner, along with others, who did not do ‘cheap’ when exceeding FSA Handbook expenses limits for hotel expenditure (£150 per night in UK, £170 in Europe and £250 in the US) by spending £811.72 on 2 nights at the Four Seasons Hotel Washington, USA as reported in an earlier article?
You should note by the way that the above claims do not appear to include subsistence and travel costs.
More caviar anyone?
Those advisers who have survived RDR have built, grown and now transitioned great businesses. This has taken many challenging years, serving their clients very well to see this happen
They carry a heavy burden of responsibility for what they do (unlike it would appear Lord Turner or ‘Sir’ Hector) and often into retirement (despite the failure to recognise the longstop by the FSA/FCA and FOS) and yes, they too pay a considerable proportion of their income in regulatory fees.
These advisers have feelings, aspirations and a desire to operate a compliant and successful business. They should be treated as fairly as they are expected to treat their customers by the FCA.
Will Martin Wheatley give this thought consideration, because right now all the past pontification on fees looks to have been disingenuous at best or at worse, one of the biggest frauds committed on an entrapped group of mainly small businesses when we hear that adviser firms could face 15% FCA fee hike this year, well above inflation?
Another unintended consequence of RDR, fewer firms having to pay more because there are fewer firms despite the logic that fewer firms to supervise should cost less?
If you feel like a break to get over the shock of all this, click on the links below for the latest "get away" rates at these FSA preferred hotels. Things may be, we can only hope, different with the FCA?