11th November 2010

IFAs Copiapó

"So will there be any daylight shining into the IFA version of the Copiapó "regulation mine" many find themselves trapped in"?

Last month we reported on the fact that in March this year the FSA were considering scrapping the RDR.

Lansons director of regulatory consulting Richard Hobbs was quoted in MM as saying that: "it only just survived an executive committee meeting in March at the FSA. The FSA are not particularly proud of the RDR but it is a question of losing face, so I think they will carry on." The FSA when approached about this "declined to comment".

Conspiracy theories abound at the moment. The pro and anti RDR camps are now quite polarized. The AIFA is paralysed by its lack of leadership at a vital time, and worse still is suffering from a perceived fear of the FSA. Much of their membership is concerned about a failure to consult with its members on what RDR views they wished to see expressed to the regulator. And to add to this toxic cocktail a view exists in some quarters that the networks remain silent due to the benefits the unintended consequences of RDR will bring to them.

Additionally, many IFAs feel that there is a very clear conspiracy linking the Treasury and the FSA, both parties claiming that the RDR decisions and implementation are "nothing to do with them".

Mark Hoban has managed to gain equal doses of respect and vilification with his McDonalds moment of madness. The FSA will not consider "Grandfathering" under any circumstances. On top of this, the AIFA has demonstrably changed its view over the years, again formed without much in the way of member consultation.

It is interesting to see the step-change in AIFA's thinking over the years. The information below, kindly supplied by IFA Alan Lakey, tells its own story.



On 29/11/2002 - upon publication of CP157 it was announced,"AIFA is also pleased about the grandfathering clauses as it "appears" that advisers already in possession of qualifications will not be required to re-sit exams. AIFA feels it should be up to firms to decide who needs to brush up on particular skills, and that there does not need to be a blanket statutory requirement imposed."

By July 2007 its view had modified somewhat, "Higher qualifications are being proposed and could present the biggest challenge for members. We will need to consider what changes we support, if any, and our position on grandfathering, should FSA press ahead with this proposal."

Now we have,"Advisers at the end of their career who will not reach level four qualifications may engender sympathy but do not make a compelling case for grandfathering"

What is the AIFA doing? Supporting its membership or going with the flow? Mark Garnier MP told me that MPs in the Treasury Select Committee raised strong concerns about the effect of the RDR with some suggesting that IFA trade bodies are not doing enough to help older advisers. It was also a view of the TSC that the AIFA was frightened or possibly intimidated by the FSA.

So will there be any daylight shining into the IFA version of the Copiapó "regulation mine" many find themselves trapped in?

The "drills" are working and supplies of support have found their way into the emergency shelter in the form of a Commons debate on the subject secured by Harriett Baldwin and Mark Garnier.

The debate I am sure is not welcome by many, especially Mark Hoban I suspect, but the effect of this will at least create light where there was dark, going some way to clearing the fog of conspiracy and suspicion that surrounds the RDR.

Whatever happens, the momentum has gathered pace around creating a greater level of professionalism and this is no bad thing. But, for the older IFAs, their treatment at the hands of the FSA on key RDR matters such as qualifications and the application of grandfathering is quite unfair.

And what of the Consumer? Have their views really been factored into the equation, or has RDR been forged on a mindset of elitism over realism. The writing is on the wall already with one major IFA firm closing the accounts of its 6,000 smallest customers, saying the service it is offering them is not cost effective and is closing its doors to those clients with less than £5,000 in assets on December 10th. On top of this, they will be charged £20 plus VAT per security per account to transfer into another company's name. They will also be charged £57.50 to terminate or transfer an Isa account to another company.

In many ways the current distribution model may not actually be broken. In such challenging economic times perhaps the £430m the RDR has cost so far and the anticipated further £40m pa thereafter is not money as well spent as the FSA would have us think?

A date for the commons RDR debate has yet to be set, but I can advise all our members that Mark Garnier and Harriett Baldwin have agreed to attend a Q&A session on the 20th December in London. More details on how to register to attend will follow soon.

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