Consumer protection through effective regulation is rightly the mantra of financial services – but does the consumer really understand what is going on?
Financial services has layer upon layer of regulation and qualification for advisers.
With the retail distribution review coming in to force from January 1, has anyone asked consumers if they have any idea what RDR stands for, let alone how it is supposed to protect them and their cash?
From the outside looking in, financial services regulation seems confusing and disjointed.
Take the statement of professional standing (SPS). The term is meaningless to a consumer but everything to an adviser.
All retail investment advisers – more industry jargon – must hold a valid SPS issued by a Financial Services Authority accredited body to give advice from January 1, 2013.
This is the official list of accredited bodies on the FSA web site:
- CFA Society of the UK
- Chartered Institute for Securities and Investment (CISI)
- Chartered Institute of Bankers in Scotland (CIOBS)
- Chartered Insurance Institute (CII)
- Institute of Chartered Accountants in England and Wales (ICAEW)
- Institute of Financial Planning (IFP)
- Institute of Financial Services (IFS)
- Pensions Management Institute (PMI).
The idea is that consumers should be reassured that members of these august organisations have ethical codes and complaint procedures to govern how financial advisers ply their trade.
Within the industry, advisers, trainers and supervisory bodies are at daggers drawn over SPS costs and membership fees with allegations of ‘rip-off’ charges demanded from advisers who cannot ply their trade without coughing up the required readies.
The problem is each has a slightly different interpretation of these codes – like the acceptance of different qualifications to support an SPS application.
For example, the Chartered Insurance Institute refuses to accept degrees more than 10 years old, while the IFP has no such qualms.
So is an adviser accredited by the CII better qualified than one accredited by the IFP – and if the industry doesn’t know, how should a consumer?
What is really needed here is a clear and transparent consumer protection policy run by one organisation with a set of rules and guidance that is applied to every financial adviser.