12th April 2011

IFA letter of the week

AN OPEN LETTER TO HECTOR SANTS - DOES THE EQUALITY BILL APPLY TO THE FSA?

On the 05/04/11 I sent the following e-mail to you and I wonder if you are able to respond to this as I have not yet had a read receipt or acknowledgement that this matter is being looked into. My concern is that Ageism is illegal in employment, training and education. The Equality Bill comes into force in 2012, making ageism unlawful in the provision of products and services where it has negative or harmful consequences. The Financial Services Authority (FSA) Retail Distribution Review (RDR) Level 4 requirement threatens the livelihood of circa 20/30% of Independent Financial Advisers (IFAs) resulting in a negative & harmful consequences not only for those advisers but also to their soon to orphaned clients (consumers). I believe these figures are accepted by the FSA and repeated by yourself to the Treasury Select Committee.

My concern is that RDR Level 4 could be construed as "Indirect discrimination", under The Equality Bill which means having a policy or practice such as the Retail Distribution Review Level 4 requirement together with a refusal to allow grandfathering which places people (financial advisers) of a certain age group at a disadvantage compared with other people.

Recent study reveals that mental faculties starts to decline in later life. Therefore to apply 1st year degree level 4 learning requirements, to ask already qualified adviser, in order to re qualify, where the average age is 54 (and to not permit grandfathering) could contravene age discrimination laws.

Other examples are given by this legislation such as a firm introduces a fitness test which all employees are required to pass. This could be indirect discrimination if fewer older employees are likely to be able to pass the test. Both direct and indirect discrimination are unlawful unless the discrimination can be justified.

Questions:

1. Have you and the FSA taken legal advice on the RDR requirements in relation to Ageism?
2. If so what was the advice?
3. If not why not?
4. What advice have you taken on the average age profile as you are reported as having a lower age profile than other industry sources?

RDR and old age
James Hay Wrap research shows: Average age of IFAs estimated at 54(1)
1This is based on industry sources. The FSA's "Financial risk outlook 2007" estimated the average IFA age as 46. James Hay go on to say: Our own contacts with industry sources that put the average ages at 54, 55, 56, and 58 years

FSA/FCA