Outgoing FSA chief executive John Tiner says the term ‘independent' should apply to advisers who both select products from the whole of the market and are remunerated by fees.
Tiner’s speech, given at the Chancellor's High Level City Group on 2 July, puts him at loggerheads with the FSA’s Retail Distribution Review, which last week proposed ‘independent’ should apply only to advisers who are remunerated by fees regardless of the breadth of products on offer.
Tiner also states he does not think commission produces an inherent bias.
He says: “Whilst I do not believe in theory that advisers or intermediaries who are remunerated by commission based on volume of sales are necessarily biased in their recommendations, the practical effect of the incentive structures in the supply chain has all too often been to operate against the interests of the customer.”
The definition of ‘independent’, which the FSA says should be reserved for fee-based advisers only, was one of the most controversial proposals at last week's RDR Conference.
In addition, a recent survey revealed most consumers think ‘independent’ means advisers who can select products from the entire market.
Tiner also feels the most important outcome of RDR is improving supply for the mass market - those who do not currently save or invest.
He says: “It will remain a feature of investment markets for sometime that products are sold and not bought, and stimulating supply is the critical element in unlocking the mass market.”
Tiner also emphasises the importance of reducing regulatory burdens to reduce costs for consumers and to make it easier for consumers to buy financial products.
He also feels the RDR is an opportunity for all to improve business practices, adding: "I, like many of our stakeholders, feel that the climate into which the RDR is being launched offers as good an opportunity as any time in the last 20 years to realise a market which will work for both firms and consumers.”
Other issues which Tiner touched upon in his speech include; regulation of large EU institutions, financial capability, banking regulation, and market abuse.
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"I am having difficulty, and from conversations with other independent financial advisers in getting my head around how they want to class “Independent” Whilst I do not always agree with Tiner,s comments at least he is now looking outside the box. I cannot see how someone with a qualification, charges fees can be independent unless they are whole of market anyway. It is also very important that the people who do not want to pay fees are driven into the hands of the banks.
I often feel that people jump on a bandwagon that is the flavour of the month. I remember, when only a few years ago direct sales forces were drummed out of the business because they could only offer one company, products and being an ifa was the be all and end all. Now suddenly even IFAs are being told that they are not capable unless they charge fees and hold another qualification.
Where is it all going to end? Does it mean that only people with money and can pay fees or want to pay fees can get independent advice and the majority of the public will be going back to dealing with direct salesforces(advisers at banks). If so, what has the past years since 1988 and all the money spent been for.
By the way I am not chartered, but in some situations fees are charged. What will also happen to the pro bono work that we do, when we attempt to advise on situations where it is obvious that the client cannot afford fees and there is not an opening for a product to be sold." Terry Arch, Eastgate Financial Services
"Dear Mr Tiner
I was once told that personal attacks are unprofessional but in your case I am sure the entire financial services industry will forgive me.
The last time you tried to tinker with fees and the like I'm sure you will remember that you were thwarted by the laws of the land and the likes of myself. The term 'independent' is not something you can interfere with and fortunately you will soon be done with your meddling in the affairs of IFAs and their clients (not 'customers' or 'consumers').
During your time at the Leviathan you have displayed an unwarranted level of arrogance and prejudice which has damaged what was once a thriving industry. Sadly it is now abundantly clear that many of your fellow directors and officers have exactly the same inability to accept that IFAs are the most cost effective and efficient distribution model that offers your 'consumers' (their clients) a choice of how they can pay for invaluable 'independent' advice which is becoming more scarce as each day goes by.
The Leviathan has been swayed by the minority of misguided advisers and purveyors of expensive tests who think 'professionalism' is only attainable by examination, this is an assumption which is not supported by fact and you only have to look closer to home for proof.
IFAs are on the hit list of the Leviathan and its masters simply because they won't give in to the demands of unreasonable regulators and will fight tooth and nail to prove they are innocent and that they have as much right to legitimate legal defences as any other individual in the UK. You have presided over a board which has voted on changes to time limits in contravention of Article 6, you have also misled the Treasury Select Committee two years in succession.
If you never find another job that pays the extortionate amount you obtained from the financial services industry it will be 'unfair justice' as you once described it.
Goodbye and good riddance." Evan Owen
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