IFAs need to take more notice of regulatory developments in Brussels as they tend to play a key role...
IFAs need to take more notice of regulatory developments in Brussels as they tend to play a key role in the grounding of UK financial regulation, Lord Hunt told advisers at his final AIFA public appearance last week.
Speaking at the AIFA annual dinner in London, Lord Hunt praised the work of advisers and AIFA officials since the trade body's establishment in 1999 because they have together produced key positions in regulatory negotiations such as the 'menu option' in depolarisation and, more importantly, key changes to European Commission proposals.
Lord Hunt pointed out that advisers need to take greater notice of European proposals, because they can set the requirements under which all advisers across Europe will have to comply, unless action is taken immediately to lobby for changes were necessary.
Some of the key regulatory proposals issued out of Brussels over the last year could have had a damaging impact on IFA regulations unless the AIFA had stepped in to lobby for alterations.
In particular, Lord Hunt quoted the Investment Services Directive as a key example, because investment advisers would have had to meet certain higher capital adequacy requirements had the AIFA not intervened.
Likewise, initial proposals for the Insurance Mediation Directive were linked to FSA proposals for depolarisation, in that they would have required all IFAs to be fee-based only.
But placing more emphasis on European regulations will only be possible in the long-term if the FSA cuts the number of regulatory reviews the UK finance sector has faced over the last two years.
"Is there any other sector which is reviewed as heavily? There has been so much review in this area, business cannot prepare for the future. Next year, IFA firms are likely to need to consider their positioning in a market where there are more options. Yet this stem of third-party initiatives tends to make the industry reactive. A greater sense of partnership [between the FSA and the industry] will lead to shared responsibility. Less pressure on the UK front could enable us to produce more pressure in Europe," adds Lord Hunt.
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