Independent Financial Advisers (Regulation)

Anne Marie Morris Excerpts

Monday 29th November 2010 Commons Chamber

[Anne Marie Morris (Newton Abbot) (Con)]

I will make my comments brief because I am conscious that we are short of time. In my constituency, I have more than 50 very small independent financial advisers, a number of whom have come to speak to me about this issue because they are very concerned about the future of advice in our very needy constituency, which has four towns and 30 tiny villages. Those people serve the financial needs of the community.

We need to consider the increasing overall need. Students are increasingly going to need help to sort out how to finance their education. People in or out of work are increasingly going to have deal with redundancy and will want to know what to do when they suddenly get that lump of money to keep them in health. People will want to know what to do with a small inheritance should they be so lucky to get one. For the elderly, the change in pension provision is extraordinary and we will have to help people to deal with pension auto-enrolment—should they fall out of it or stay with it? There is much to consider and much help is needed.

Of course there are IFAs who have a bad reputation. Some sold products when it was inappropriate to do so just to maximise commission, some sold badly performing products and others mis-sold precipice bonds, which was unforgivable. With a cost of £45 million a year to the consumer, we need to address this issue, but what can we do? The retail distribution review is absolutely welcome, but we must strike a balance. We must get something affordable and the FSA must enable IFAs to remain in business while protecting consumers. How can we do that? The Government have said that 50% of IFAs in the profession would already comply, so what of the other 50%? Clearly, there is an issue and we need to make sure that more of those people stay in rather than fewer; otherwise, the predicted savings to consumers of £1.8 billion will not be made. That is not what this Government are all about, so we need to consider a different way of proceeding.

I spent 30 years in a profession that has parallels with this one and I should like to draw the House’s attention to some parallels that might help the Minister. In my time as a lawyer, I looked at the changes that the Law Society wanted to bring about when it considered introducing continuous professional development for older members of the profession. Instead of putting 35 hours in place immediately, the number of hours was slowly ramped up over a five-year period. The scheme did not just enable people to have out-of-office time; study time in the office and in the evening counted as well, which was helpful. I suggest the Minister looks at that system. We need to look at a modular approach for exams and at distance learning. As one of my hon. Friends pointed out earlier, we need to look at qualifications that are relevant to the business the individual is practising.

I wholeheartedly support the comments that have been made about experience and the idea of grandfathering. I was formerly a professional mentor, and with the European Mentoring and Coaching Council I looked at how we might develop qualifications and accredit people already in a profession. We looked at a framework model that enabled people to qualify when rules changed. I certainly commend that to the Minister.

The point about the big bang in 2013 when everything will change is absolutely right. That is not an appropriate way forward. I hope the Minister recognises that the businesses we are talking about are microbusinesses. Costs are crucial. Fees for IFAs have gone up by 4.8% this year, and I hope he is not thinking about the national financial advice service, at a cost of £50 million to the industry, replacing in any way the financial advisers who will undoubtedly fall out of the system.