Practising IFAs were underrepresented in the working parties which produced the recommendations in the Retail Distribution Review (RDR), says threesixty.
In its financial services report for 2007, the IFA support services provider says of the 42 members of the five working parties, only six represented IFAs “despite having the largest share of the market”.
The firm also criticises the Review’s suggestion only advisers with certain qualifications can call themselves independent, as well as the RDR’s assertion signing up to an ethical code of a professional body will improve firms’ behaviour.
However, it does praise the Review’s proposals regarding introducing Customer Agreed Remuneration (CAR) – factory-gate pricing renamed - and the suggestion professional standards need to be raised across the board.
In a relatively brief report which also considers the FSA’s discussion paper on platforms, threesixty deems the composition of the working parties which produced the recommendations in the RDR as “strange”.
The firm points out that, of the 42 members of the five groups, there were 15 representatives from product providers, four from networks, three from professional bodies, five from the FSA, one from consumer groups, eight from banks or building societies, and six representing practicing IFAs.
“To find the group which is currently closest to doing the job ‘properly’ with such small representation, despite having the largest share of the market, is strange,” the report states.
Criticism is also levelled at suggestions in the RDR more professionalism will lead to fewer complaints.
The report points out according to the Financial Ombudsman Service (FOS) annual review for 2006/7, 19% of complaints received were in respect to banks, with 37% to product providers.
It says both these sectors are dominated by large businesses with employed salesforces already actively encouraged and incentivised to obtain additional qualifications.
The report goes on to point out: “Only 12% of complaints received related to IFAs – a group where small businesses are prevalent and taking professional exams is at personal cost in both time and money.”
Threesixty also hits out at the RDR’s suggestion signing up to an ethical code of a professional body will improve ‘behaviour’, saying: “This does seem to be an attempt by the FSA to side-step its responsibilities.
“Given that the various professional bodies involved (PFS, IFP and IFS) have no major track record (or indeed resource) in monitoring firms to assess the degree to which the ethical standards are adhered to, these bodies will need to consider new ways of working if this step is to have any positive impact.”
The threesixty report is available through the firm's website (see right).
If you would like to comment on this story, contact:
020 7034 2636
Have your say:
"Regarding under representation of IFAs on the RDR round tables - two of the five IFAs were practicing fee-based advisers, namely Bob Reid and Gill Cardy. I've got a lot of time for both but there are more commission-based IFAs than fee-based and it seems that the commission-based were ignored. Nick Cann was also on the panel!" Phil McGovern, MPA Financial ManagementIFAonline
HL and Liberty SIPP slowest
Lifetime and annual allowances
'IFAs bore the brunt'
'Recovery or boom'