Everyone in the industry has an opinion on the FSA, particularly at the moment with the regulator's push toward a more principles-based system for delivering advice.
And maybe a touch surprisingly, given the usual nature of relationships with authorities, a large chunk of it seems to be positive.
I base this not on an industry-wide survey, but on three meetings I have had in the last three days.
In each, the FSA, no TCF, was brought up and, even though there were a few grumblings, all concluded somewhere along the lines of: “They’re trying to improve the industry, and (finding this bit difficult to say) that’s a good thing”.
Of course it is.
But, and how many times will you hear this phrase in your life, the man in the street is getting overlooked.
This is a new reaction I’ve had to the whole TCF thing. And it came from a chat I had with one IFA this week. We had a long conversation – most of it about the sad passing of Vivienne Starkey – but he ended the call with an observation:
“The sad thing about this [drive toward fee-based] is that it doesn’t really help the people that really need the advice. I’m not talking about the ultra-wealthy, or even the moderately wealthy, but those on mid-to-low incomes.
“And that is because the Government charges VAT on fee-based advice. The people that really need it are the ones that are least likely to be able to pay for it because they are charged VAT.
“On the one hand, we’ve got the FSA campaigning for a move to fee-based advice. On the other, we’ve got a government taxing those that do. They [the FSA and the Government] don’t seem to be singing from the same hymn sheet.”
The problem with money is some people have a lot of it and some people don’t have enough of it. Yet the way the system is at the moment seems to favour the former, the very people that really don’t need to do anything with their money except spend it.
Those people who will head toward retirement with the same fears they’ve had all their lives, rather than the sense of comfort they’re entitled to, aren’t helped by the system.
Fair play to the FSA for trying to do something about the industry, for trying to make advisers and providers ‘treat customers fairly’.
But why are clients subject to VAT tax on fee-based advice if fee-based advice is supposed to be the very thing that drives up standards in the industry and helps out the man in the street?
And what about IFA firms? There are plenty that do a fantastic job of offering advice to their clients, no matter what their incomes. What if they are suddenly forced to offer only a fee-based service? They’ll lose business.
Alan Lakey, partner at Highclere Financial Services, put it very succinctly recently.
He says IFAs will be unable to compete within the market because of the FSA's focus on fee-based advice services.
“The theory of fee-based advice is perfect, but it doesn't match the reality,” he says.
“The average man doesn't like paying fees and 90% of the population will either do nothing or will be pushed into the arms of the bancasseurers who are tied.”
The government must get in line with the FSA over TCF and the whole fee-based debate. Until it does, the FSA’s proposals will never have the backing they perhaps deserve.
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 Scott Sinclair on 020 7034 2636 or email [email protected]IFAonline
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