Independent Financial Advisers (Regulation)

Andrew Bingham Excerpts

Monday 29th November 2010 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

I congratulate my hon. Friends the Members for West Worcestershire (Harriett Baldwin) and for Wyre Forest (Mark Garnier) on instigating this debate. I was unable to attend the Westminster Hall debate on 20 October, but the transcript indicates the quality of debate that we have in this House on occasion.

Many issues have been discussed at length, so I will attempt not to repeat what has been stated by other hon. Members. However, I will highlight some areas of concern. I concur with hon. Members who believe that the FSA is taking a sledgehammer to deal with problems that are not great enough to warrant it. The FSA’s proposals will damage choice and result in small businesses being forced out of trading. It will affect the choice available to people who live in rural communities in particular. As has been stated, the proposals discriminate against older members of the financial advice community. There will be an effect on the availability of advice and support for those who are less wealthy in our society. All those problems must be addressed.

On damage to choice, Ernst and Young estimates that as a direct result of the proposals, there might be a reduction of about 50% in the number of financial advisers who are willing to carry on trading and that there might be as few as 10,000 fully accredited financial advisers with about another 10,000 providing restricted services. Such a reduction is unacceptable. Even the FSA states that there might be a loss of as much as 25% in smaller firms who are willing to provide this service. It is difficult not to conclude from those figures that the proposals will affect choice. I find it hard to accept the FSA’s argument that it is bringing forward the proposals to serve consumers and give them more protection and choice.

[Andrew Bingham (High Peak) (Con)]

Does my hon. Friend agree that as well as removing choice, the proposals might lead to people not bothering to save—at a time when people need to save—because they cannot get advice on how to do so or on where to put their money?

[Guto Bebb]

I accept that point. In particular, I believe that those who are less wealthy in our society will be discriminated against, even though there should be greater encouragement for them to save than other people. That issue relates directly to the damage to choice.

Although I share the Treasury’s view that there is a need to ensure that advice is of a high quality and accept that there has been mis-selling and bad advice—I do not argue against the need for a degree of regulation—it is difficult to accept proposals that even the FSA accepts will result in a reduction in the services that are available to the public. In particular, I remain unconvinced of the merits of the examination process being the be-all and end-all. Are structured learning and examinations really a substitute for experience, integrity and honesty? If I were looking for a financial adviser, those qualities, rather than an exam, would be the first on my list.

--- Later in debate ---

[Nia Griffith (Llanelli) (Lab)]

I recently met a group of independent financial advisers who serve Llanelli and the surrounding area. They fully understand the need to have a properly regulated industry, and the need to improve consumer confidence. They want high standards, and I can assure hon. Members that they simply would not get away with it if they did not have high standards, particularly in a close-knit community, where everyone knows whether they have done well or badly in their last transaction. Their next custom really does depend on that. They also made the point that they already have certification. In addition, many of them have a great many years’ experience. They also accept that new entrants to the profession need proper qualifications and training.

A number of difficulties have already arisen with the new scheme. The first relates to the availability of slots to take the exams at the examination centres. One independent financial adviser in my constituency is waiting for a slot to take an exam in January in Bristol. Now, Madam Deputy Speaker, there is nothing wrong with Bristol, except for the fact that it is some considerable distance from my constituency. There is also the inconvenience of having to travel there in the winter, to fill a particular slot for a particular examination. If that slot were not available, they would have to go somewhere else.

[Andrew Bingham]

Does the hon. Lady agree that, if grandfather rights were to be introduced, as many of us wish, it would not only be fair to existing IFAs but release more slots so that new ones could come into the market, thereby increasing competition and choice for consumers?