Large numbers of MPs used last night’s parliamentary retail distribution review (RDR) debate to express grave concerns about the review and urge the FSA to think again in areas such as grandfathering of existing advisers.
Up to 80 MPs attended the backbench business debate last night in parliament with the vast majority expressing huge worries about the damage likely to be caused by the RDR.
Harriett Baldwin, Conservative MP and Treasury select committee (TSC) member, called the qualification requirements in the RDR “illogical” and called for the government to work with the FSA to deal with the “cliff-edge” advisers currently face.
She said: “We all want better quality advisers, no doubt about it but to close the door on practising your profession on the January 1, 2013, is really not on.”
Mark Garnier, Conservative MP and TSC member, said: “Lord Turner, the chairman of the FSA, suggested that reducing the number of IFAs might well reduce the overall cost of investor advice. How can reducing competition possibly result in improved service to consumers? I can see no reason at all for not introducing grandfathering rights. Indeed, when the FSA was set up it introduced grandfathering rights when IFAs came over from the personal finance authority.”
Responding to the debate, Mark Hoban (pictured), the Treasury financial secretary, praised the work of IFAs, including his own, and said he recognised the strength of the debate on grandfathering. (article continues below)
He said: “It is an important debate to have, but we need to think about how much experience is sufficient for people to be grandfathers, and about how we can ensure that that experience covers the range of products necessary to provide whole-of-market, independent advice.
“We ask people to advise on a range of products, such as pensions, insurance bonds and ISAs, and they need such technical knowledge to do so. Consumers are entitled to know that their adviser has a high standard of technical knowledge, and a minimum qualification standard should deliver that.”
He added: “I cannot overstate the detriment to consumers from poor and biased advice. Indeed, the FSA estimates the detriment to consumers from inappropriate advice to be £200m per annum, and it thinks that the figure could be significantly higher. Consumer detriment has led organisations such as Which? and the consumer panel that advises the FSA to support the measures in the retail distribution review. We need to get that balance right and to address some of the issues that undermine consumer trust in the IFA sector, and the FSA has sought to do so through the RDR.”
Andrew Tyrie, TSC chairman, accused the FSA of inflexibility and loss of perspective.
He said: “There is one crucial point we just must get across to the FSA, which is that the increase in the compliance burden is going to be paid for by the consumers. It is the loss of perspective from the FSA, the inflexibility of approach they seem to be taking in implementing this which is reflected in the very large number of people in the house.”
George Mudie, TSC member and Labour MP, said the FSA continuing with the RDR will result in a reduction in consumer choice.
He said: “There seems to be a lack of interest in the diminution of choice they are going to present if this is forced through by them on consumers of all ages.”
An associate of the CII for 25 years, Heather Wheeler, Conservative MP, said there was not enough evidence to support the need for the huge change the FSA was imposing through the RDR.
She said: “If I felt they were doing this because there had been bucket loads of horrendous examples of misselling, or clients had been ripped off or there were statistics showing the IFAs had been responsible for the majority of the complaints in the industry, maybe I could understand their views. But none of this is true.”
Nicholas Soames, Conservative MP, attacked the FSA for not listening to the industry.
He said: “They haven’t listened to the industry or the professionals in the industry, which will seriously damage the interests of the consumer very profoundly and it is the consumer the FSA seeks to protect.”
Jim Shannon, DUP MP, said the RDR would mean poor people would not be able to afford to get advice in future.
He said: “It is not just a matter of advisers providing help for the wealthy, people who can stay at home and watch their money work and grow for them, the people I am speaking on behalf of tonight are those who have a small total disposable income and wish to enhance their small pensions and seek help from financial advisers.”