Independent Financial Advisers (Regulation)

Andrea Leadsom Excerpts

Monday 29th November 2010 Commons Chamber

[Jim Shannon]

I thank the hon. Gentleman for his comments. I have the same concerns.

It is estimated that it takes 400 hours to do the exams. That is approximately 10 weeks when people do not have the opportunity to earn money or do what they normally do. Advisers in Strangford have painted a different picture to that painted by the retail distribution review. Most of the customers of advisers in my constituency are working class. I have been informed by many financial advisers that they have spent time with people without receiving any financial reward—we have heard that from hon. Members on both sides of the House tonight.

One adviser offered advice to a female client who was about to go through a separation. She was stressed out about her finances, but the adviser spent a lot of his time on the phone to her. For all his work, he earned not a penny. The road that the regulator is pushing advisers down will mean that they will be unable to afford time if they do not get paid. Will we therefore end up with people being unable to afford sound financial advice, exactly as the hon. Gentleman said?

I represent a rural area, as do many hon. Members, including the hon. Member for Aberconwy (Guto Bebb). We are aware how the proposals will affect and impact on people in rural areas. Consumers will suffer substantial and unprecedented detriment owing to the unintended consequences of the proposals. Would it not be wiser or better to protect grandparent rights, as at least two or three hon. Members have intimated? Doing so would give the protection that many need. A substantial portion of the adviser population will leave the industry. Various surveys have been conducted and although there is no consensus on the figures, it is obvious that adviser numbers will fall drastically.

One of my constituents in Strangford wrote:

“I am 54 years of age…the heavy regulation is taking its toll. I am ¾ of the way through the new exam structure. Many advisers are finding it impossible to pass these exams as many are over 55 and are finding the stress unbearable.”

Another hon. Member referred to a 63-year-old adviser for whom contemplating exams will put him away in the head. The result will be anxiety, depression and stress. My constituent predicted a drastic fall over the next three years in the number of independent financial advisers. He continued:

“Advisers are finding the regulations unbearable, and many are having problems due to”

what is taking place. He made a statement that I found moving and honest:

“We are all starting to swallow the negativity thrown at us by the regulator over the past numbers of years, which is trying to kill us off”.

Now IFAs are facing another obstacle and barrier. We cannot afford for any businesses to be lost, especially ones that will take the financial burden off the state by enabling people to supplement their pensions and not need state aid and benefit. They are the people in my constituency and across Northern Ireland on whose behalf I wish to speak.

Robin Stoakley, head of intermediary business at Schroders, said:

“I do see up to 30 per cent of the IFA market leaving”.

How on earth could we support something that would take away 30% of the IFA market? Furthermore, Aviva UK Life marketing director, David Barral, said the firm predicts that by 2013, IFA numbers will fall to 10,000, leaving middle market consumers unserviced.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Gentleman agree that at a time when we desperately need small and medium-sized enterprises to be increasing their activity, not reducing it dramatically, this is a disastrous thing to be happening?

[Jim Shannon]

I agree wholeheartedly with the hon. Lady. The one great thing about tonight’s debate is that we have, I think, a united front—if that is the way to put it. All the parties are in agreement, which is good news.

Time does not permit me to go through the long list of people in the industry agreeing with the prediction of a sharp decline in the number of advisers owing to these proposals. However, it is clear that there is a definite problem with these regulations and their impact on IFAs. If the adviser population falls by about a third, as predicted, it will leave millions of consumers without an adviser. Some will migrate to other advisers—we understand that—but a great many will be left without a trusted source of advice. The UK currently suffers from the largest saving retirement and protection gaps in its history, and it is essential that these gaps and the current over-reliance on the state are reduced. I think that many in the House are prepared to accept that.

The UK can ill afford to lose 10,000 advisers. Such a catastrophe would intensify the existing problems. The UK’s leading consumer champion, Martin Lewis, of Money Saving Expert, remarked:

“There’s a worrying possibility that the FSA is about to kill off”—

his words—

“independent financial advice in the UK for all but the wealthy. I do hope I’m wrong. I’m not convinced most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash.”

That is an expert’s opinion.

I speak not only for the financial advisers in my area who have been forced out of their jobs, but for the wee man and the wee woman who have asked me to come here and fight their case for them. I also stand for the thousands of people in my constituency who benefit from the current system. People who are forced to pay for all advice offered will be unable to invest much, and therefore will not invest or, worse, will invest somewhere they should not, with dire consequences. I am aware that it is the FSA that is making these recommendations, and I ask the Minister to do the honourable thing and support the alternative proposals put forward. They would benefit the larger advisers, as the FSA is trying to do. However, we also have to look after those disadvantaged consumers, so I urge the House to support them.