7th December 2009

Adviser Alliance officially launched

During the last week the Adviser Alliance officially launched. Details can be found on our website, www.adviseralliance.co.uk and it is both instructive and essential that advisers, product providers and the regulator understand why we exist.

We cannot wrestle back the hands of time to last week let alone those days that many older advisers recall with warm thoughts, when life was simpler and advising clients was a pleasure.

I'm talking about pre 29 April 1988 when regulation had yet to impact on adviser practices and more working time was spent seeing clients rather than compiling lists for compliance purposes.

Not that everything was good in those days, we had seriously bad savings and pension plans sold by less than adequate 'advisers' and there was a lack of commonality in respect of brochures and consumer information.

However, along with the removal of 'bad plans' and 'bad advisers' we have lost the protection of the law and suffered from an overkill of regulation and compliance, much of which fails to protect the consumer and often serves only to create new quangos, new jobs and, ironically, to increase the cost of regulation which itself feeds though to higher costs for consumers.

The latest Big Idea is the RDR. A set of proposals born from the confused mind of the departing FSA Chairman Callum McCarthy. These purported improvements to the distribution of retail products and the advice process are badly thought out and betray the evidence of the committee-style thinking which typifies Government departments and quangos.

Far from improving the lot of the consumer the RDR will cause confusion, inhibit innovation, cause a high percentage of IFAs to depart the industry and result in millions of consumers being unable to access whole of market advice. In short, the consequences will be diametrically opposite to the stated intended outcomes.

In 2005 the FSA's Dan Waters quoted EEC Commissioner Charlie McCreevy, "Is a regulatory proposal the only possible solution or are there less intrusive, less costly alternatives that can achieve the same objectives?" He then stated, "Only if I get a 'yes' to all these questions will new proposals get my stamp of approval."
In June 2009 Dan argued the point further, "It is important that practitioners and investors continue to engage with policy makers to ensure that regulatory changes are appropriate, proportionate and most importantly deliver the right outcomes for investors and for the wider financial system",

In October this year, talking about potential EEC regulation in respect of hedge funds Waters stated, "We are not opposed to regulation. We would welcome sensible and proportionate regulation."

Additionally, within an FSA paper titled 'Principles of Good Regulation' they argue, "Any burden or restriction imposed should be proportionate to the benefits expected from it. In fact, the FSA website is littered with papers and speeches which repeat the mantra about regulation being proportionate to the benefits

The RDR proposals are crying out for a rethink where Dan's question and the FSA's criteria can be applied to find cheaper, less intrusive and ultimately better outcomes for both firms and consumers.

Thus far the existing adviser organisations have failed to make much of a dent in the RDR's armour. In fact, two of those organisations seem far more focused on the profits and kudos to be gained from the burgeoning cult of the examination than in challenging the damaging proposals

The IFA Defence Union (IFADU) has worked tirelessly over the past seven years to introduce accountability and to thwart bad regulation yet it was a lone voice with limited support. To give it a festive slant it was like Father Christmas battling alone with the assistance of a few dedicated elves.

These harsh and tortured times call for a more focused and robust approach and this is what Adviser Alliance aims to achieve. We are not trying to be another AIFA, that body does fine work across the spectrum of financial services, no, we are looking to explore three or four themes and concentrate our efforts on them.

What are these themes? Firstly, the RDR is a mishmash of ideas which fail to gel and which resonate with the cymbal-crash of unintended consequences. The removal of provider paid commission provides an attractive soundbite but the reality is that it will disenfranchise millions of lower and middle-earning consumers. Add to this the unrealistic retrospective examination requirements, something that a leading barrister considers to be illegal, and you kill off up to half of the current IFA community.

Let's look at the 15 year longstop. Like all other UK citizens advisers used to enjoy the protection of the Limitation Act but this legal defence was cunningly removed when FSMA 2000 was drafted. The Treasury issued Statutory Instrument 2326 which was intended to restrict the lack of a longstop to post December 2001 cases but the Ombudsman ignores this piece of subordinate legislation.

It is absolutely clear that advisers Human Rights have been trampled and it might be that only a legal challenge will restore them. In this regard it is true to say that advisers have less Human Rights than paedophiles and convicted criminals.

This is where we seek to make a difference. We hope that all advisers will join with us in seeking to resolve these problems before the landscape is irrevocably changed to the disadvantage of all but the banks and bucket shops.

Together we can do it.

Alan Lakey
Adviser Alliance