Robert Sinclair, director of AIFA, Dr Tim May of the Association of Private Client Investment Managers and Stockbrokers and Steve Gazzard, Institute of Financial Planning director of operations all gave evidence.
The session focused on the unintended consequences the Retail Distribution Review, fees for advice and implementation of increased compliance and qualifications will have on the cost and availability of financial advice to consumers.
The committee expressed real concern that AIFA, PCIMS and IFP were “speaking in code” rather than being plain about the fact that the RDR might drive many IFAs out of the industry, reduce competition and increase the cost of advice for consumers.
Conservative Member of Parliament for the South Northamptonshire, Andrea Leadsom, said: “Trade bodies are always terribly nice. They don’t turn round and say ‘this will not work’. You have a problem with some of these things but your message isn’t being heard.
“This is your chance to tell us what needs to be different so that we as the back bench voice of parliament can go and tell the front bench this isn’t going to work because these are the unintended consequences. This is your chance – are you actually taking it?”
But Robert Sinclair told the committee: “The challenge we face is that within the IFA community we have three camps. One endorses the changes, one believes changes need to happen but will get on with it anyway and another group is saying it will not put up with any changes.”
He added that those proportions could balance at 30%, 40% and 30% and AIFA has to argue the views of all of its members.
Andrew Tyrie, chairman of the Treasury Committee, said he felt “the long shadow of the FSA [seems to be] cast over here muting your concerns and criticisms.”
He added: “Maybe we need more regulation, maybe we need less, but what we need with regulation in flux is very clear advice from the people you represent of what’s been wrong with the system.”
He urged the trade bodies to “give thought to what we’re really getting for the money we’re paying for the regulation and whether that regulation should be structured differently or whether we can do without some of it”.
He said this evidence along with estimates on the cost of complying with the RDR could be submitted to the Treasury in private. Official estimates have seen the costs of RDR rise from £400 million to nearer £1.7 billion, but Tryie acknowledged this could still be too low.
Leadsom added that the witnesses should be proposing some solutions to the “potentially disastrous” outcomes of the RDR for consumers.
“What are the trade bodies doing to propose an alternative that will be cheaper to consumers, that will give them the protection, that will defend competition in the industry?” she asked.
“Because from what you’re saying about the RDR, we will have a real problem in this country with less competition and fewer people in the industry. From what I can glean, you’re saying this is all potentially disastrous.
“Should you not be putting forward your own plan for, for example, peer review of people who can’t be grandfathered but need to be able to evidence that they’re capable of the required standard?”
All three trade body representatives said they had been lobbying the FSA for three years but not all of their concerns had been listened to during consultation.
