The regulator proposes two advisory channels - \"independent\" and \"sales\" - to reduce confusion for consumers. It might strike some people as funny, but the chairman fails to see the joke.

“So do you have any observations to make about the New Star reconstruction?” I asked the chairman of the imperturbably-sized investment company Second Coming Asset Management as we enjoyed a pint or two of Including Me in The Substantial Dilution. “Nothing particularly leaps to mind,” he shrugged in reply.

“Oh,” I said. “In that case, shall we instead talk about the latest episode of the soap opera that is the Retail Distribution Review?” “Why not?” agreed the chairman. “In fact, I’m rather surprised you haven’t brought up the subject earlier.” “Well, it’s normally something I would have discussed with your son over at Huxley Epsilon,” I said. “Only he appears to have gone missing.”

“Yes, he does that from time to time,” said the chairman nonchalantly. “I think his record vanishing act lasted in the region of 15 years – I seem to remember him mentioning being kidnapped by Amazonian Indians or something along those lines – but, still, he usually pops up somewhere eventually. Anyway, this whole RDR business has ramifications for fund groups as well as advisers, you know.”

“I do know,” I replied. “Although the FSA does now seem to be playing the adviser side more for laughs. After all, it was only back in April that Her Majesty’s financial services industry was broadly in agreement that the regulator had made a decent fist of channelling the requisite clear blue water between advice and sales.

“But now somebody at the FSA genuinely seems to believe the best way to help consumers better distinguish between sales and advice is to have two channels called ‘independent advice’ and – here’s the nugget of comedy genius – ‘sales advice’. No matter how hard I might try, I really don’t think I could make up a financial joke as good as that one.”

The chairman looked confused. “Never mind,” I sighed. “You were saying how the RDR also affects fund providers and indeed I was reading about that only the other day. Apparently the FSA has got it into its head that fund providers are going to face an uphill struggle adapting to the new regime …”

“Whatever that regime eventually turns out to be after this never-ending stream of consultations and feedback documents,” interrupted the chairman with a harrumph. “As you say,” I nodded. “Anyway, the FSA thinks you’re all up against it because – I think this is how its argument runs – over the years your entire distribution structure has been built around perpetuating the evil that is commission.”

“I know,” laughed the chairman. “Sometimes I spend whole days thinking about nothing else beyond how we can better bribe financial advisers into recommending Scam’s funds.” Actually, here I became rather less sure that he was joking, so instead asked: “So you don’t share the FSA’s concerns about fund groups meeting the appropriate deadlines?””What – to remove all predetermined commission payments on retail products by 2013?” replied the chairman. “Absolutely not. I suppose the FSA may have got it into its head that investment houses might have a problem with hitting a deadline that’s a whole five years away because we’ve not always been as speedy as we might have been complying with their various demands in the past.

“But – and I’ll let you into a little secret here – the reason neither Scam nor any of its competitors is working itself into a lather about this deadline is we’ve learnt from bitter experience never to trust the FSA so far in advance. Put it this way, would anything the regulator has done in the last eight years fill you with confidence it wasn’t going to change its mind at least twice more along the RDR road?””I guess not,” I said. “Well, there you go,” said the chairman. “When everybody’s convinced the FSA has run out of U-turns then we’ll flick a few switches and either add some share classes to our Oeics or maybe adapt an institutional class. But, for now, I think there are more pressing issues to worry about. “So,” I said. “Any thoughts on the New Star deal yet?” “Nope,” said the chairman. “Not a sausage.”