Independent Financial Advisers (Regulation)

Alun Cairns Excerpts

Monday 29th November 2010 Commons Chamber

[Mark Garnier]

Yes, I agree entirely. It is absolutely the case that the harder-working and more successful IFAs simply will not have time to take the exams and start dealing with the dead hand of regulation from the FSA.

With up 10,000 experienced IFAs of good standing potentially being forced to retire for no valid reason, it is estimated that as many as 3 million existing clients, many of whom will be elderly, will lose access to their trusted adviser as of 1 January 2013. I fear that without the FSA looking again at grandfathering the experienced through the process of implementation and without a rethink about commissions, independent financial advice will become the preserve of the wealthy only.

[Alun Cairns (Vale of Glamorgan) (Con)]

Will my hon. Friend give way?

[Mark Garnier]

I have just about finished actually.

--- Later in debate ---

[Mr Mudie]

I completely agree.

I forgot to congratulate the hon. Member for Wyre Forest on securing the debate and on introducing it. I also congratulate all Members in the Chamber. It appears that the only thing we can do is to come to the Chamber and voice our anger and concern. When the Committee discussed with the Bank of England the new powers of the new regulator, it was the British Bankers Association, of all people, who raised the democratic deficit. The point was made that we were handing so much power to the regulators and the banks that there was great danger that they would be pronouncing and taking action on matters that affect us as representatives of our constituents —matters relating to employment and standards of living. In our humility and generosity, we are passing great power to the regulators on matters for which we will be accountable—perhaps not in law, but in the view of the public. We will be accountable for the actions of the regulators, so a rethink is very necessary.

[Alun Cairns]

I thank the hon. Gentleman for giving way. I, too, pay tribute to my hon. Friends the Members for Wyre Forest (Mark Garnier) and for West Worcestershire (Harriett Baldwin) on initiating the debate. I congratulate them on that.

Does the hon. Member for Leeds East (Mr Mudie) accept that the FSA could be acting in the context of, on the one hand, lack of regulation in the banking industry in the past, leading to a complete knee-jerk reaction and, on the other, disproportionate regulation at the consumer end of the market, such as the debate is highlighting?

[Mr Mudie]

I do not completely agree. I think the banks could be the beneficiaries if 30,000 independent financial advisers are taken out of the market. The hon. Member for Wyre Forest referred to Lord Turner, whose attitude was that the number would not be 30,000, but between 10,000 and 20,000, which was acceptable, otherwise the FSA would not be doing it. There was no explanation why the number was acceptable, or of the unintended consequences of the decision. The authority had just decided that it would be acceptable.

Ordinary people who have worked in the industry for decades will be hurt by the decision. It is not a knee-jerk response to oppose the direction of a decision and the manner in which it is being imposed on individuals who have worked in the industry without blemish. It would not happen in other industries and other practices. In addition, there seems to be a lack of interest in the diminution of choice for the ordinary consumer of all ages if the decision is forced through.

The Treasury Committee has asked for responses. I plead with every Member, whether or not they are in the Chamber, to do some writing and complain. They should ask the very able Chairman of the Committee, who is standing by the Speaker’s Chair, to call a review meeting so that we can call individuals on this subject. We do not want to tie it up in a long agenda where it receives only 10 minutes’ scrutiny; we want a full meeting where witnesses are placed under real scrutiny and asked both to account for the decision and to reconsider it.

[Harriett Baldwin (West Worcestershire) (Con)]

All I can say is “Wow!” when I see how many colleagues and Opposition Members have shown up this evening to take part in this historic debate. I believe this is the first time in this Chamber that the Financial Services Authority, which was set up by the former Prime Minister as the independent statutory regulator, has been subject to such parliamentary scrutiny. In fact, I believe that we are today showing that we can, and do, take a real interest in what the independent statutory regulator is doing.

The Chairman of the Treasury Committee pointed out how many Members are in the Chamber this evening for a Back-Bench business debate, when we are not obliged to be here by anyone other than the constituents who have contacted us with their concerns.

[Alun Cairns]

I support what my hon. Friend said about the number of Members present this evening, which is unusual, as she pointed out. The indication so far is that this is a cross-party issue and that party politics is not playing a part in it. The comments from the Opposition Benches support the comments made in the debate.

[Harriett Baldwin]

I entirely agree. We have learned in the past few years how important good financial regulation is.

Imagine the outrage there would be in the Chamber if a Minister said from the Dispatch Box, “I am going to put between 20 and 30% of an industry out of business at the stroke of my pen on 1 January 2013”? It is unbelievable that we have allowed an organisation to grow and, unscrutinised by this legislative body, have such a power over our constituents’ lives.

--- Later in debate ---

[Heather Wheeler]

My hon. Friend is correct. Is that not interesting? Many of us have been trying to get to the background of why this retail distribution review was brought in and where the FSA was coming from. The statistics really speak for themselves, and I am astonished that we find ourselves in this position.

[Alun Cairns]

Even if the statistics were much worse than they are, does my hon. Friend believe that the proposals in the RDR would lead to improved and safer advice for clients? I certainly do not believe that they would, even if the statistics were worse.

--- Later in debate ---

[Chris Leslie]

As I say, this is a good time to debate those matters. There are options that must be explored. We have not bottomed out the debate. Perhaps the Financial Services Authority can consider not necessarily the hon. Gentleman’s suggestion in particular, but why commission changes are not being made across the wider financial services sector. There have been historic problems with mis-selling of products, not solely from an IFA perspective, and I can see why many people feel that these changes are necessary.

I would not counsel hon. Members to take issue with every section of the RDR—many of those who spoke in the debate did not. It is right, for example, that there should be proper clarity between independent and restricted market advisers, and that rather than waiting for the customer to inquire, there should be full disclosure on that up front.

[Alun Cairns]

rose—

[Chris Leslie]

I have only a couple more minutes.

The crux of the matter must be the issue of qualifications—the A-level equivalent threshold for financial advice. Although I understand the move to a QCF level 4 standard, which seems entirely fair, it is sensible that there should be a mechanism to allow some sort of conversion of existing qualifications or existing experience to that new level 4 qualification. I cannot believe it is beyond the wit of the FSA, Ministers and others to find some way of doing that. Hon. Members such as the hon. Member for Meon Valley (George Hollingbery) spoke about how we should look at the grandfathering issue and what options there might be. It is important to move that forward.

[Alun Cairns]

rose—

[Chris Leslie]

I should like to conclude because I want the Minister to be able to explain in a way that he did not necessarily do in the first flush of debate on the topic in Westminster Hall, and possibly reflect the views of the vast number of Conservative Members. I am still perplexed that the Financial Secretary to the Treasury chose that McDonalds diploma analogy. Perhaps he will reflect on that and recognise that some IFAs were slightly astounded by that reflection on their professional integrity. He might want to choose his words more carefully.

It is important that parliamentary accountability should be voiced. The more I reflect on these financial services policy issues, the more it strikes me that there is a democratic deficit. No, we do not want to be embroiled in the day-to-day operational issues of regulation, but policy is policy and we are accountable for that. Perhaps, as my hon. Friend the Member for Leeds East (Mr Mudie) suggested, we can return to the issue when we come to the FSA reform Bill and discuss amendments to that. Hon. Members will log and remember today’s debate and we can come to that later on in the day.

It is a shame that there is no motion tonight on the issue. It would have been useful for Members to express the formal position of the House of Commons on the matter. This is a time for the Minister to listen to the debate and perhaps reflect carefully on the measured and worthwhile comments that have been made by hon. Members across the Chamber.