20th October 2010

Meeting with Mark Garnier MP

Mark Garnier was elected to Parliament in May 2010 and his experience before politics was in finance and business. Mark left the investment banking world in 1999, setting up his own small businesses in investment management, in which he still has an interest. So, IFAs can be sure that this is someone who understands the financial services marketplace and how small firms are impacted by regulation.

Following an introduction from Panacea.com member Simon Mansell, I was able to spend an hour or so with the Tory MP and TSC member Mark Garnier. Mark has hit the headlines and the minds of the IFA community with his comments about the RDR. This has resulted in hundreds of e-mails from IFAs, which he is going about answering as soon as he can in his busy Westminster timetable. Indeed he asked me to send his apologies to those who have not yet had a reply assuring me that they will very soon.

The purpose of the meeting on the 19^th October was to discuss a number of issues that concern Panacea.com IFA members. This was particularly timely as that morning he had sat on the TSC hearing evidence from the AIFA and others about financial services regulation and the next day he was a key part of the Commons debate on the RDR.

As a number of you will have read in Money Marketing, MPs in the TSC have raised strong concerns about the effect of the RDR with some suggesting that IFA trade bodies are not doing enough to help older advisers unhappy about the new qualification requirements. Indeed, the TSC accused Robert Sinclair, director of AIFA and other trade bodies of being too nice when giving evidence on financial regulation.

The chair of the committee questioned whether the trade bodies were holding back their true feelings about forthcoming regulation and questioned whether the “long shadow of the FSA” may be stopping them from expressing their true opinions.

Mortgage Strategy reported that the committee urged the trade bodies to submit evidence in private if they were worried about the regulator.

Speaking about the RDR, a member of the committee told the trade bodies: “This whole discussion brings out my worst fear, that trade bodies never really say what they think. They take what’s a given and fiddle with it at the edges. Trade bodies are always terribly nice. They don’t turn around and say this will not work and take the appropriate steps to get the media on their side to make change happen”. They then went on to question whether the trade bodies were seizing their opportunity to tell the committee what changes needed to be made asking “this is your chance, are you actually taking it?”

With all this very fresh in Mark’s mind we explored some of his thoughts on RDR, regulation, cost, CPMA and the FOS.

The FSA has failed the public and the industry in many ways and ultimately, the blame for many of its failings can lay at the feet of Gordon Brown with the drafting of the FSMA. Mark is quite horrified that the FSA’s estimated incremental compliance cost of the RDR has skyrocketed, with one-off costs rising from �£430m to between �£605m and �£750m and questions how this can happen. “How can that happen,” he said.  Broadly speaking, he believes that the RDR is a change for change sake. A string of qualifications does not always result in a better adviser. It is how an IFA conducts his business, applies his knowledge and expertise and acts in the best interests of his client that is the important point. A string of qualifications is not all it takes to make a good adviser. With the formation of the CPMA, he would hope to see regulation being fairly applied and at reasonable cost.

He does not feel that the RDR benefits the “masses” and certainly not basic rate taxpayers. He felt that with the levels of personal debt being so high and savings so low something must be done to redress this imbalance and that the IFA community is a key player in that process. Not everyone is able or willing to pay fees and that if key elements of the RDR were to remain unchecked this would drive those most in need of independent advice into the hands of the banks.

When asked about the FSA considering scrapping the RDR, a position which he was not aware of, he felt that the most important part of this now very expensive exercise was to get it right.

The Human Rights Act and how RDR may be a breach of it was not an issue he felt able to comment upon as he was not a lawyer. He did however believe that “Grandfathering” was the way around resolving a lot of the concerns of the older IFA community.

He conceded that if something was not done to address this problem, the retirement/ exit strategies of many IFAs who planned a while ago to realise the value of their efforts in building a business would be in ruin. They would fall victim to “vultures” circling to pick up business for a song in a fire sale market place.

When asked if he thought the FSA treated advisers fairly, he said that from what he hears, the answer is no.

MPs in the Treasury select committee have raised strong concerns about the effect of the RDR with some suggesting that IFA trade bodies are not doing enough to help older advisers unhappy about the new qualification requirements. Indeed, the TSCaccused Robert Sinclair, director of AIFA and other trade bodies of being too nice when giving evidence on financial regulation.

Many IFAs think that Mark Hoban does not understand IFAs. This is not a view he subscribed to and felt that the perception may be as a result of the very wide ranging brief that he operates under. Commission is a dirty word in the eyes of many.

Garnier emphatically states that he “likes commission” as a method of remuneration, it is quite acceptable as long as it is fully disclosed and the client is in agreement that the remuneration for services rendered is fair and reasonable.

We moved on to the subject of the FOS. He did not subscribe to the view that those adjudicating needed to hold industry qualifications, he felt the most important point of any adjudication was that it was fair and reasonable. He was not aware of the concerns of many in regard to the longstop and when this was explained he seemed very surprised that the FSA would allow such a blatant override of a parliamentary statute - The Limitations Act 1980. He was also not aware that an IFA has no appeal process against Ombudsman final decisions other that by way of a judicial review. With his current busy workload, it was suggested that this should be explored further after the RDR debate process had run its course in the Commons.

The meeting with Mark Garnier was like a breath of fresh air. He understands the plight of IFAs and is intent upon making sure that fairness is a key part of the regulatory process. The process starts now and all IFAs can be sure that if the formation of the CPMA has anything to do with him and the TSC members, it will be fair, reasonable, proportionate and cost effective for consumers and those it regulates.

Mark has agreed to attend a Panacea.com seminar day in December, ideally with Harriet Baldwin for a Q&A session, keep an eye out for the date and venue.

RDR, Panacea Comment