The FSA's timetable for both the consultation period and the implementation date for its ...
The FSA's timetable for both the consultation period and the implementation date for its proposals on reforming polarisation have been branded unrealistic and over ambitious by AIFA.
In a letter to FSA Chairman, Sir Howard Davies, Lord Hunt, Chairman of the Association of Independent Financial Advisers (AIFA), said in just one month since the FSA's paper was published, each reading of it has brought out 'further important issues for you and the industry to think through'.
Hunt said in view of the scale and significance of these issues, the three-month consultation period should be extended to enable the sector to make, 'more constructive and better researched responses to this most significant package of proposals, not least on those subjects in Chapter Five of the paper where innovative proposals for the regulation of the advice process are put forward'. AIFA also highlighted the amount of work involved in drawing up the 'cost benefit analysis' for the proposals.
Hunt said the timetable, 'suggests the FSA underestimates the scale of change which it is proposing'. He has asked the FSA to extend the consultation period until the end of May.
Hunt also said the FSA 'should guard against being too ambitious in its timetable for implementation.' He said if the FSA finally decide there are to be changes in the polarisation regime, draft rules would only be available in July at the earliest and then consulted on over the summer. 'Yet' he added, 'there has been talk of possible change before the end of the year'.
He said IFAs would not be able to determine the strategy for their own businesses until those rules were available and the overall direction of FSA policy had been confirmed. He added, 'The FSA could indeed distort the market by precipitate implementation'.
If firms needed to introduce a defined payments system, Hunt said, then there would be inevitable systems and administrative changes which would take time to carry out. 'Otherwise, some might conclude that they could not remain independent solely because of the FSA timetable.'
Hunt warned against implementing any new rules on an ad hoc basis. He said, 'the introduction of change in one part of the market before another could have a distorting effect. Proposals for disclosure of the cost of advice, separate from all other costs, should be implemented in all parts of the market at the same time. Otherwise, there will be the risk of consumer detriment when like will not be able to be compared with like'.
He concluded, 'Your consultation paper rightly identifies the continued existence of IFAs as a driver for competition in the market. You should ensure that you do not damage this source of competition by your own timetable'.
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