Fee based financial planning finally arrives
It’s official. PS10/6, published at the end of March, is the final confirmation we have been waiting for. Commission based investment mediation will definitely end on 31st December 2012.
The FSA, in releasing the Policy Statement, also revealed that half of small firms opposed the adviser charging proposals, and this in turn triggered another round of hysteria about the mass exodus from the industry. But wait a moment. IFAs are a hardy breed, and will adapt. Moreover, there’s a lot in the new rules for investment advisers to be optimistic about.
Nevertheless, failure within the sector for all parties to really talk through the implications of the profound change which PS10/6 will deliver is characteristic of the relationship between the Regulator and many Practitioners in the investment intermediary market.
We have reached this point with a widely held perception that Investment Brokers and the Regulator are enemies, and that somehow the Policy Statement signals that we have both the victor, and the vanquished. But it doesn’t need to be like this.
The most common observation I encounter from small firms is that of fear about what’s going to happen when commissions dry up.
In publishing PS10/6, the accompanying press release from the FSA summed up all that is exciting about the new arrangements for advisers and consumers alike, and I can’t help but think that when both advisers and consumers read these carefully, renewed enthusiasm, for both parties to engage with one another, will soon follow. These are the highlights:
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The published new rules will remove commission bias from advice on retail investment products, helping to restore consumer confidence in this market.
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Consumers will know what they are buying upfront, how much it will cost them and also have the peace of mind that it was recommended to suit their needs.
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Paying upfront need not hinder consumers’ access to financial advice. If a customer feels they do not want, or cannot afford, to make an upfront payment, the product provider can facilitate the cost of the advice being included in the cost of a product. But the fundamental point is that the cost of the advice will be agreed between the consumer and the adviser, not between the adviser and the product provider.
Perhaps it is the 3rd item in the above list which investment advisers haven’t previously seen spelled out in such simple and clear terms, that has been at the seat of their fears. I hope that next week, my observations will be of renewed optimism and relief from adviser firms. The new arrangements, when articulated as in point (3) above, should be received by consumers very positively, and I’d expect advisers to want to convey this message to their customers right away. It’s very TCF.
Mark Ehlinger - 8th April 2010