The Association of Independent Financial Advisers (Aifa) has announced it will collect evidence on with-profits in the first stage of its ‘stakes in the ground' initiative, which aims to protect advisers in the event of future complaints.
The initiative was announced at the end of 2004 as a way to benchmark acceptable advice each year given the regulatory, political and cultural conditions existing at the time.
It is hoped the scheme will be used in future complaints to the Financial Ombudsman Service (Fos) and in regulatory actions by Financial Services Authority (FSA) to ensure they do not apply regulation retrospectively, but assess firms by the regulatory and political environment existing at the time.
Tracey Mullins, director of public affairs at Aifa, says the first ‘stake’ the organisation will gather evidence on is the with profits market because it is an area the FSA has said it is concerned about.
She states: “We feel it is wise to look at an area that the FSA is likely to be concerned about and which is a regulatory theme for them to focus on.”
Evidence will not be gathered historically, but will start from this year so regulators in five or 10 years’ time can use evidence of 2006 when they consider the suitability of advice given at that time.
Mullins is fairly confident the regulators will use evidence from the project and will not apply regulation retrospectively following assurances made by Stephen Bland, director of small firms at the FSA, to the Personal Investment Marketing (Pims) conference today.
Bland states: “The FSA believes that firms should be assessed against the assumptions that were reasonably made under the regulatory context of the time and there should be no retrospective application of later, more exacting standards. This has always been, and will continue, to be our view on retrospective regulation as we move towards more principles-based regulation.”
Moreover, he says Aifa’s stakes in the ground initiative is a “positive step” and, to have a written record of the custom and practice of advisers in the area of with profits, will prove useful for everyone.
Bland says advisers can help ensure the regulators stick to their intention by ensuring they have properly documented the advice they have given and the reasons why, as this demonstrates compliance and reduces the need for regulatory intervention.
He highlights contracting out of the additional state pension as one area in particular the FSA has conducted work on to gather information about historical and recent sales practices.
Given the assurances, Mullins states: “We are happy for the FSA to continue saying [they will not apply regulation retrospectively] as often as they like because it shows the message is getting through to the regulators and we can hold them to account. The FSA said stakes in the ground is useful because Bland refers to it in his speech. They seem in favour of it so we assume they will use it.”
John Ellis, head of public affairs at the Personal Finance Society (Pfs), believes the announcement is really good news and says Aifa should get full marks for the degree of acceptance they have gained for their initiative.
He believes with-profits is a good place to start, stating: “This is not before time – there is a great deal of confusion about with-profits.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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