A plan to split regulated financial advice into three categories has received a mixed response from ...
A plan to split regulated financial advice into three categories has received a mixed response from the industry, and divided opinion on the likely impact on the offshore market.
The FSA revealed its proposals to create three categories - professional financial planners, general financial advisers or primary advisers - as part of its Retail Distribution Review. The review is aimed at improving standards of professionalism, making financial advice more cost effective and improving customer understanding of what they are getting.
Under the changes, professional financial planners would require minimum practices and standards and agree remuneration with the customer and call themselves 'independent'. General financial advisers could continue to take commission, but would not be considered to have the same range of in-depth knowledge or qualifications, and would be unable to call themselves independent. Primary advisers would cover a substantial range of savings but with limited analysis of client need.
Nick Plumb, IFA at Bright Financial Planning, said the proposals were likely to cause the IFA industry to shrink, which would dent offshore business. "If the ability to label oneself independent rests on being fee-based and having extra unnecessary qualifications, fewer people will qualify," he said. "Since most offshore business comes through independent intermediaries, that will limit the amount of offshore business being done. IFAs are being regulated out of sight."
However, Peter McGahan, managing director of Worldwide Financial Planning, said, if the regime improved standards of financial advice, it was likely to mean advisers would increasingly consider offshore products.
He added that a switch to more fee-based advisers was also likely to result in offshore products becoming cheaper, making them more attractive.
But both McGahan and Bright agreed the proposed regulations would lead to greater confusion for the consumer. Bright said: "I wasn't in favour of depolarisation in the first place as it made things too confusing. However, this has made things even worse by inventing a new set of titles. The irony is the FSA is supposed to be the people's champion.
"It will mean customers can't get access to independent advice unless they are prepared to pay for it."
McGahan added the new regime would not solve the problems the FSA was trying to tackle. He said exams being proposed for professional financial planners would be too generalist and would fail to filter out incompetent advisers.
The consultation period for the FSA's proposals closes on 31 December.
More than half of people over the age of 55 see financial security as a top priority in retirement, yet a third allocate more time to buying a new car, research from Legal & General (L&G) has found.
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