House of Lords Reform Bill

Debate between Harriett Baldwin and Jesse Norman

Monday 9th July 2012 Commons Chamber

[Harriett Baldwin]

We could oppose Third Reading, therefore, if we felt we had not achieved consensus in this House.

There is also consensus in this House that anyone who has been convicted of a serious crime should be kicked out. The cost of the second Chamber must be reduced, too. I am not convinced on this point; I will need quite a lot of convincing in respect of the Deputy Prime Minister’s earlier assertion that this proposal would be cost-neutral.

[Jesse Norman]

The cost figures have reached their current level only by the entirely illegitimate manoeuvre of including costs—such as costs of the Commons associated with the Lords—that have not yet been recognised in legislation, let alone achieved, as well as by ignoring the £85.7 million cost of five-yearly elections.

Independent Financial Advisers

Debate between Harriett Baldwin and Jesse Norman

Wednesday 20th October 2010 Westminster Hall

[Harriett Baldwin]

I thank my hon. Friend for that interesting intervention. I shall come to precisely that point in a moment.

The market for financial advice suffers from comparatively low consumer trust. Consumers find it difficult to engage with the financial services industry—banks are not exactly the most popular institutions in the country at the moment. Economists would describe buying financial products as a transaction in which consumers have asymmetric information; in plain English, the buyer knows a lot less about the product than the seller. There is therefore a need for proper independent advice.

Along with banks, IFAs have been guilty of selling certain products because they give a better commission. Like banks, IFAs have been found to have mis-sold private pensions to public sector workers. Like banks, they have mis-sold high-income precipice bonds. Often, they have sold products that simply performed badly or carried high charges. There is no doubt that the industry’s reputation could be improved.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

My hon. Friend mentioned the Treasury Committee, and it may be of interest to note that I was in the Committee yesterday when it talked about this issue. Interestingly, the response from the Association of Independent Financial Advisers and the Association of Private Client Investment Managers and Stockbrokers was that the retail distribution review, having started with high ambitions and high principles, not only ran four times over cost, but conducted a somewhat ineffective consultation. I put the question whether, in that aspect at least, it had become a bit of a fiasco, and the witnesses concurred, very much to my surprise. My hon. Friend might want to bear that in mind in future discussions.

[Harriett Baldwin]

I thank my hon. Friend and neighbour. He is a distinguished practitioner and member of the Treasury Committee. I am very interested to hear about the evidence yesterday.

We should not underestimate the costs of mis-sales to consumers. The FSA’s cost-benefit analysis assesses the cost to consumers of the pensions mis-selling scandal at £45 million per annum. In reaction to such circumstances, the FSA has spent the past several years consulting on how to address the issues involved. I share its goal of improving consumers’ perception of the industry and access to high-quality investment advice.

--- Later in debate ---

[Harriett Baldwin]

There is an important point to be made about how some of the larger organisations, and indeed some banks and bancassurers, will most readily be able to have their staff trained for the exams. However, that raises the question whether the exams will really test the skills needed by a good financial adviser. In the investment world, experience is valued and the FSA is imposing on the market a one-size-fits-all, prescriptive approach to education, at great cost to consumers, in return for a modest benefit.

I have written to the chief executive of the FSA and to date have received a letter, beginning, “Dear Mr Baldwin”, simply reiterating the FSA’s consultation paper conclusions. I would like to ask the Minister to answer a few questions. The FSA is the independent statutory regulator. However, it is answerable ultimately to the Treasury. Does the Minister believe that it is proportionate in the present case to impose a regulatory burden of £1.7 billion on consumers? Is the Minister concerned that up to 25% of smaller advisers are likely to leave the industry, handing a competitive advantage to banks and bancassurers? Is he convinced that the banks will not be able to find a way to reward employees for pushing certain products? Does he share my concern that the FSA’s own impact assessment suggests that those who get reduced access to advice are likely to be the smaller, poorer consumers in more remote areas?

Does the Minister think that there might be a more proportionate way for the FSA to achieve its objectives? For example, IFAs who have passed exams could add the letters of qualification to their business cards. Consumers could then be educated and could choose an unqualified adviser if they preferred, but would come to know over time that there was a brand to the qualification.

[Jesse Norman]

There is also a simple solution for firms of more than one person, which is that the senior member can sign off on the work or qualification of the person who has not received formal accreditation. That allows for the sharing of liability, the preservation of standards within the firm and the guarantee of good quality to the customer.

[Harriett Baldwin]

I thank my hon. Friend for that helpful suggestion.

I would also like to ask the Minister how changing from commissions, which are currently exempt from VAT, to advice, which will attract VAT, will not add a further cost for consumers.