Independent Financial Advisers (Regulation)

Tracey Crouch Excerpts

Monday 29th November 2010 Commons Chamber

[Mark Garnier]

Absolutely. The other group of people who will lose out because of the removal of these grey-haired sage IFAs will be the younger ones. Who will mentor the young, aspiring and highly qualified but short on experience new trainee? The FSA has no answer.

Let me turn now to fees and commissions. The FSA is further proposing that from January 2013 consumers will no longer be able to choose how their adviser is remunerated.

[Tracey Crouch (Chatham and Aylesford) (Con)]

Does my hon. Friend know of any survey that has been conducted of whether consumers have any appetite to pay fees for their financial advice?

[Mark Garnier]

My hon. Friend will not be at all surprised to hear that there are a number of surveys. Which? Undertook a survey that showed that 85% of people would prefer to pay fees, yet a survey by Harris Interactive showed that only 6% of the public said they would be happy to pay fees as opposed to commissions. That is a big problem, I think.

In future, customers will need to agree a fee with their adviser. That means that no longer will a client pay for advice via a commission charged on a transaction.

--- Later in debate ---

[Mr McCann]

I agree entirely. The measure will impact on small businesses, not the big part of the sector, and that is why the Financial Secretary should have been mindful of the commitments people have to make to gain qualifications in the sector. One IFA, in particular, heard the Minister’s comments and blogged:

“I’ve just spent 70 hours revision to pass RO1. Nobody has paid me for my lost time. Nobody has asked me 1 of the 100 questions in the exam for the last 22 years. This guy”—

the Financial Secretary—

“needs to get in the real world.”

That leads me to my main contention: the proposals and timetable to increase the qualifications needed to participate in this sector of the economy are not sensible. Exams and qualifications in the sector are not new, but the proposal to introduce new rules that effectively force people to re-sit exams without taking account of their experience or, most importantly, clean regulatory record is patently unfair. Moreover, the sector will not be able to absorb the cost of revalidation; instead, as other contributors have said, it will be passed on to the customer in the shape of higher fees.

Others have also mentioned that many professional groups in the United Kingdom are not asked to revalidate, so I seriously wonder why we are trying to isolate this particular sector. Why, as other hon. Members have asked, do we want to take away that valuable experience from that important part of the economy?

Our time is limited, and there is a limit of six minutes on each contribution, but I too want to mention one individual who has contacted me in the lead-up to the debate. He is an old friend of mine, a next-door neighbour, and it is important that we bring our experiences to the House when we discuss such issues. Jim Hunter sells financial products, and he contacted me, but he did not complain about the need for transparency, fairness or greater clarity. In fact, having done business with Jim, I know that he had all those ingredients many years ago. Indeed, I am sure that many people who have contacted hon. Members are in exactly the same boat.

Jim was talking to a colleague recently at a meeting. The gentleman is 60 years old, with more than 30 years’ experience in the industry, and if he sat the proposed exams he would be 63 before he finished them. Jim explained that that person would be lost to the industry and have to retire before his time, because he would not study at that time of his life. There are many people like that, trying to make a living for themselves in difficult times, and that ability to earn a living in this important part of our economy will effectively be taken away from them without any real benefit to the economy itself.

[Tracey Crouch]

Does the hon. Gentleman agree that, although the RDR was introduced with every good intention, further work should be suspended until there has been a full cost-benefit analysis of its impact on the IFA community and, indeed, on consumers?