Sesame Bankhall Group response to FSA CP09/31 – Delivering the RDR

Ivan Martin, Sesame Bankhall Group’s Executive Chairman, has responded to the FSA’s CP09/31: We wholeheartedly support FSA in its goal to encourage more people to actively engage with our profession and help them recognise the benefits of seeking financial advice. That is why we have embraced the drive towards higher industry standards and welcome any move that enhances the British public’s perception of professional financial advice.
We also welcome the FSA’s move towards greater flexibility on alternative assessments and we will continue to work closely with FSA, in conjunction with Aifa, on practical solutions in this vital area. However, whilst we are encouraged by FSA’s willingness to listen on issues such as this, we remain concerned that some of the FSA’s actions are inconsistent with its aims.
Professional standards and qualifications
Higher professional standards offer an opportunity to build greater confidence in the advice profession, but to achieve that goal thousands of advisers have to balance the needs of their clients today, whilst undertaking additional work to not only meet the new higher standards, but also review their business models for the future. For many firms this will involve a tremendous amount of work that should not be underestimated.
That is why we have consistently argued for the introduction of work-based assessments as a common sense solution that recognises the wealth of knowledge, skills and experience that already exists within our profession. The FSA’s greater recognition of alternative assessments in CP09/31 as both a transitional and ongoing route for competent advisers is therefore a step in the right direction.
However, with the continuing imposition of the 2012 deadline we are increasingly concerned about the lack of detail, which is making it very difficult for advisers to determine their approach to professional qualifications. The clock is ticking and there is no clear plan on alternative assessments; no new examinations and updated study materials; and the “no regrets” CPD gap filling requirements are also yet to be fully defined.
We restate our call for a robust and practical work-based assessments route, as we believe this holds the key to many advisers successfully meeting the RDR deadline. We ask the FSA to work with us in developing a common sense solution that avoids the risk of experienced, competent advisers leaving the profession prematurely, which will have damaging consequences for UK consumers.
Remuneration
We fully support the FSA’s rationale for not applying adviser charging to the protection market because of the lack of evidence of potential consumer detriment, but we believe that similar arguments apply equally to the regular premium investment market. The reality is that people seek out debt, but they need to be persuaded to save.
As has been borne out by many studies – and acknowledged by the FSA – people who receive professional financial advice recognise the benefits and trust their IFA, which is why we need to build a strong profession that can reach out to more people than it does today.
If recent economic events have taught us anything, then it is our need to reinvigorate the UK’s savings culture, so that we can transform the fortunes of the British people and discard our nation’s dependency on debt. Of course this won’t happen overnight, but creating the right structure is crucial.
We agree that any discussion over remuneration should be between the adviser and their client, but this should not lead to the removal of factoring support by providers, as we believe this enables millions of people to benefit from expert guidance and thereby enhance their financial well being.
Advisers have a crucial role to play in helping to close the savings gap and the removal of factoring services by providers will lead to large parts of the mass market becoming disenfranchised – at the very time that more people need help and support. The FSA is right to be concerned about any potential consumer detriment, but removing factoring will simply result in fewer people accessing advice, which in our view is detrimental to the wider public interest.
Furthermore, we also take issue with the FSA’s assertion that regular savings only constitutes a small proportion of the market and the impact of a ban on factoring will therefore be limited. The fundamental point is that the regular savings market should be far larger than it is today and we need to encourage growth rather than restrict it further.
There is still time to address this and we urge the FSA to consult the OFT on the benefit to consumers of allowing a standard, industry-wide factoring scheme, which would remove the risk of adviser bias, but avoid the damaging impact of a factoring ban on consumers and advisers’ businesses.
We recognise the immense challenges before us, which is why at every stage we have resolutely defended the interests of the advice profession. With the retreat of the State – and many employers – from benefit provision, we are entering an era of greater personal responsibility. The British public needs the expert guidance of our profession more than ever before, which is why it is imperative for us to work together to get the transition right and ensure we have the capacity to meet that demand.