Industry feels report blames IFAs for the bad service of banks and tied firms
The Association of IFAs (AIFA) has attacked the Financial Services Authority (FSA) for lumping together advice given by IFAs with guidance given by banks and tied advisers.
Criticising recent thematic work undertaken by the regulator, which investigated how firms are adapting their advice process to the FSA's Treating Customers Fairly (TCF) regime, Chris Cummings, director general of AIFA, said the FSA had failed to distinguish between the advice offered by IFAs and other non-independent firms in the industry.
Outraged by the report, Cummings said it was not fair to lump all these groups together as the main culprits are banks and tied firms, not IFAs.
He said: "Even though we are told that the mystery shopping involved IFAs, banks, a product provider and a distributor, when reporting on the outcomes, the FSA prefers to refer to those firms involved simply as 'large and small financial firms'. This leaves both the industry and consumers in the dark about the types of firms that are providing a good service.
"If the industry and consumers are going to benefit from these mystery shopping exercises, the FSA needs to identify which parts of the advice sector are failing and which firms are meeting the regulatory requirements. The FSA needs to match its findings with the status of the firms involved in its research," he argued.
Alan Lakey, principal of Highclere Financial Services, agreed with Cummings.
He said: "Historically it is known that the IFA sector produces less complaints to the Ombudsman and it is not unreasonable to expect that the charges of 'bias' are more to do with bancassurers and direct sales forces, which suffer sales targets.
"The FSA fails to explain the precise breakdown of its mystery shopping antics, which, if I had the same lack of detail in my files or 'suitability' letters, would land me in hot water. The FSA shouldn't expect the industry to pull its socks up if it cannot manage its own dress code."
The FSA findings showed that although all the firms involved said they were offering a full advice service, only a third actually undertook a full review of clients' needs and objectives.
It also found that quality of advice is dependent on the quality of advisers, with around one-third of firms questioned not having adequate training and competence procedures in place.
Commenting on the result of the study, Clive Briault, managing director retail markets at the FSA, said while the regulator recognised that most firms are making good progress on implementing the TFC initiative, many companies still need to step up a gear.
He said: "We have set a deadline for the slowest firms to catch up with the majority, and we have outlined the core consumer outcomes we want to see."
