This afternoon saw the Treasury Select Committee receive evidence from two senior members of the Financial Services Authority (FSA) in respect of the Retail Distribution Review.
FSA chief executive Hector Sants was joined at the evidence table by Sheila Nicoll, director of conduct policy at the FSA.
Sants and Nicoll were on the receiving end of tough questions from MPs on the committee for two hours.
It was an interesting session and we can draw a number of conclusions from the questions and answers we heard this afternoon.
In the mind of the FSA, there is clearly a balance to be struck between the continuing risk of consumer detriment and the loss of ‘capacity’ in the advice market.
The FSA seems prepared to accept a number of IFAs leaving the retail financial services sector in return for delivering the objectives of the Retail Distribution Review.
Sants and Nicolls appeared to get confused around the number of advisers who would be leaving the sector, but talked about a range between 8% and 13% of the total population of 48,000 financial advisers retiring at the end of next year due to the new regulations.
At one point during the proceedings, it became abundantly clear that the Treasury Select Committee has no real power over the Financial Services Authority, due to the way the regulator was established by the Financial Services & Markets Act 2000.
In short, the FSA might have to sit there and listen to what MPs have to say, but they have no obligation to change their direction based on instructions from the Treasury Committee.
When asked whether the FSA had any plans to raise the minimum qualification requirement for advisers to QCF level six in the future, Sants responded by saying they had no “formal plan” in place for this.
Those watching would not have failed to notice the wide smiles that appeared on the faces of Sants and Nicolls following this answer. Any financial adviser who is not already working towards a QCF level six qualification following the Retail Distribution Review has failed to see the writing on the wall.
Whilst this was an interesting session, nothing is going to change in respect of the Retail Distribution Review between now and the end of next year when it is fully implemented.
If MPs want to have greater control over the regulation of financial advisers in this country, they are going to need to re-write primary legislation rather than simply amend what already exists before the Financial Conduct Authority (FCA) takes up the reigns.
Photo credit: Flickr/Florin Draghici
