Independent Financial Advisers (Regulation)

Heather Wheeler Excerpts

Monday 29th November 2010 Commons Chamber

[Heather Wheeler (South Derbyshire) (Con)]

I declare my interest: I am an associate of the Chartered Insurance Institute, having studied for and passed my professional exams in 1985. Although I have not practised as an insurance broker since 1987, I wanted to speak tonight because I recall the debate when I was studying about how the importance of exams was a strong factor in professionalising the insurance sector. At the time, I felt that that was an over-egging of the situation, and here we are 25 years later and the Financial Services Authority is using a sledgehammer to crack a nut.

I am totally opposed to the new rules that the FSA is imposing on independent financial advisers. If I felt that it was imposing them because there had been bucket loads of horrendous examples of mis-selling, or because clients had been ripped off, or because there were statistics to show that IFAs had been responsible for the majority of the complaints in the industry, perhaps I could understand. But none of that is true. As we have heard, IFAs are responsible for only 2% of complaints from customers; the banks bear the brunt, at 61%.

[Mr Robin Walker (Worcester) (Con)]

I and congratulate my fellow Worcestershire Members on having this debate. Does my hon. Friend realise that the figures of 2% and 61% that she has just cited are further strengthened by the fact that the proportion of complaints against IFAs has gone down every year for the past five years and the proportion of complaints against the banks has risen every year over the same period?

[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 ---

[Heather Wheeler]

Absolutely. I thank my hon. Friend for bringing up that point. It is clear that the baby is being thrown out with the bathwater. Nobody at the FSA seems to want to explain why. IFAs that have offered solid advice for years, with unblemished records, should be granted grandfather rights. Like many other Members, I have been trying to find other areas of business where new rules are to be introduced without any grandfather rights. I cannot. Even licensed properties—pubs, to you and me—kept their grandfather rights when the new licensing laws came in a little while ago.

It has been estimated that the effect of the rules being introduced in 2013 will be that we will lose 30% of practising IFAs. Where will the business go? Yes, you guessed it: to the banks—to the people who have the record of providing 61% of the complaints from customers. What is the FSA saying about that? Absolutely nothing. We have to ask ourselves why the FSA is doing this. I cannot find a credible reason. As we have heard, on its own cost-benefit analysis, the cost of introducing these new rules has risen from £660 million to £1.4 billion to £1.7 billion.

I urge the Minister to reopen talks with the FSA, not to allow it to put 30% of IFAs out on the scrap heap and not to reduce individuals’ choice of where to go for financial advice. Finally, he should use all his charms—he knows that I know he has charm—on the FSA, because the Government are new and “choice” and “fairness” are the catchwords that represent us, not “draconian, bureaucratic, Stalinist centrists”.