Hanging in limbo is not a position anyone would want to find themselves. However, this is exactly the uncomfortable situation hundreds of advisers are currently in.
The demise of firms such as Park Row and Alpha 2 Omega has created a pool of advisers who are no longer registered and therefore unable to practice.
Indeed, as in the case of Park Row, even at the end of January, three months after they were deauthorised, 83 advisers are still awaiting reauthorisation with Personal Touch Financial Services and Tenet.
Part of the FSA's remit is to go into adviser firms on treating customers fairly (TCF) visits.
However, even though these visits provide the perfect opportunity to uncover and report systemic failing if they are occurring, which could bring a firm back from the brink of administration and help them onto the right track, this is not being achieved.
The question is surely, why does the FSA take so long to ensure failing firms go through the correct compliance? Poor intelligence could be a possible reason as without the proper systems in place the FSA does not have the resources to work efficiently when making these visits and attempt to save firms before it is too late.
The result is that firms go under, causing havoc for advisers and their clients alike while they wait for the FSA to investigate the failed firm before the advisers can be re-registered.
In the meantime, advisers will be experiencing serious cashflow issues and, to add insult to injury, this wait is currently being further extended by a backlog of advisers waiting to be registered.
We must not forget that at the heart of this matter is the issue of client service. With the firm going into administration and being disbanded, there is no actual procedure to deal with clients and their interests while the advisers are kept hanging, unable to continue practicing until the FSA gives them the word.
The proper systems need to be put in place and controls are required to protect those that most need to be looked out for. Without this public service requirement being fulfilled by the FSA, the clients are suffering along with their advisers.
The answer as to why there is a backlog and advisers are stuck unable to practice is simply because the FSA is overloaded. They need clear systems to identify failings in firms earlier, or if it is too late then to ensure a smooth transition for all concerned to other firms.
It is certainly not in the public interest for a number of much-needed independent advisers to be temporarily out of the industry.
There is little doubt we will see more of the same, with more firms losing the fight to carry on in the current financial environment, but with the FSA stepping up its visits to firms and with the correct systems in place, one would hope they will be able to spot systemic failings before firms have reached the point of no return.
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