7th February 2011

New model advisers: 'bust a deal, face the wheel.'

It is really good to see an element of regulatory redress concern coming from the pro RDR New Model Adviser (NMA) camp who until now have continued to praise the merits of the RDR, urging those who are anti to either "shape up or ship out".

Now the realisation has dawned that the Old Model Advisers shipping out appear to have a cost and that cost will fall on those who shaped up, ie the RDR friendly camp who will be the only one's left in the post apocalyptic regulatory "Thunderdome"!

So, with all the Old Model Advisers (OMAs) gone, the NMAs have stumbled upon the vision of a regulatory version of "Bartertown".

The controlled chaos of Bartertown is maintained by a set of inflexible laws, including one that states that no contract can be broken, for any reason. The punishment for breaking this law is equally inflexible and invoked with the simple phrase, "bust a deal, face the wheel."

Who is playing the roles of Master and Blaster in this post RDR regulatory scenario, who is providing the fuel, who sets the laws and who faces the wheel in the Thunderdome? Hoban, Sants, Turner, Smith, Wheatley, OMAs? Who is playing "Aunty Entity"- Please feel free to suggest.

So back to reality, to avoid the possibility of facing ever growing calls from the FSCS of "bust a deal, face the wheel", IFAs are starting to question the fairness of it all and are starting to fight back

The "Fight for Fairness" campaign has two objectives, both highly laudible

1. The classification of firms into FSCS funding classes needs to be changed. Advisers should not be paying for the collapse of providers like Keydata Investment Services. Companies that do not advise consumers directly and intermediate the sale of their own products and/or funds should be removed from the investment intermediation sub-class.
2. The polluter should pay. A pre-funded model for the FSCS will ensure unscrupulous firms will pay some of the costs of their collapse. Responsible advisers should not be shouldering all the cost. 


We live in a compensation hungry world where when things go wrong it is somebody else's responsibility to put things right, sometimes it is not the fault of a firm and sometimes consumers have even been known to lie to get compensation. But at what stage do you draw the line?

Well it would appear that the TSC are now looking at where to do exactly that. IFAonline reports that "Government plans to make the Consumer Protection and Markets Authority (CMPA) a 'consumer champion' are "inappropriate, confusing and potentially dangerous", and should be dropped, the Treasury Select Committee (TSC) says".

Interestingly, the TSC raises concerns the financial reforms risk placing non-banking sectors under "inappropriate regulation".

Alan Lakey commented in our Linkedin group "The FSA is already aware that their desired outcomes are fading away and that the actual result will be mayhem, consternation and a dramatic reduction in consumer engagement. Peter Smith outlined this awareness and the FSA's lack of a Plan B when he told a conference that if it doesn't work they'll have to think of something else"!

Regulation in financial services is vital but how much responsibility the regulatory blame-makers want the blame takers to carry will very much depend upon MPs and the TSC and whether they have the power to assert a regulator's responsibility for the mess it has presided over with the simple phrase, "bust a deal, face the wheel."

Click here to sign up to the NMA petition.

RDR