19th April 2011

Interview with Stephen Gay Part 2

Grandfathering

You held the view that Grandfathering was not an idea you supported prior to joining AIFA. What evidence do you have to support the view that the AIFA stance on grandfathering reflects the views of grass roots members rather than just your own and those of the various committee members?

Grandfathering is the elevation of a practitioner from one level of qualification to a higher level, without the requirement for evidence of capability to merit that higher level. The application of grandfathering could not be on a discriminatory basis. If we had thousands of advisers (young and old) raised at the stroke of a pen to the level that many IFAs are achieving through a great deal of hard work, I believe it would be against the interests of AIFA’s membership. I know that there is little appetite amongst AIFA members for allowing younger IFAs or bank advisers to be grandfathered.

 I appreciate that this subject is highly emotive and has been extremely important to some IFAs. But despite the public debate the reality is that there is no possibility that Grandfathering will be allowed.

AIFA’s approach on this is to continue to argue for flexibility on the deadline for those showing best endeavours, and to make it easier for IFAs to reach Level 4 by arranging a qualification (via CIOBS) which can be achieved in a single sitting with a moderate amount of preparation, and is entirely based on case studies.

How will AIFA improve the consultation process between itself and its members to ensure that their views are sought and are more fairly represented in the future?

I am reviewing all aspects of the Association, with the full co-operation of Council and it is my prime objective to improve the way AIFA operates and the service it provides. However, I don’t accept that members’ views are not heard or that their interests are not fairly represented. There is no obstacle at present to any member engaging in the democratic or policy-making process.

It is worth noting that whenever we send out a briefing to members we ask them to respond with input to policies we are developing on regulatory consultations in progress.  We need insightful contributions from members to policy formation, we constantly seek it, and we want more of it.

Do you believe RDR is a good thing and a change for the better for advisers in and why?

It is my role to run AIFA in accordance with the will of the elected Council.

I am of course a member of the Council myself and my views have influence, but I do not decide AIFA’s policy.

That said, my personal view of RDR is probably best described as ‘glass half full’.  I think the core proposals on remuneration and professionalism are broadly right, and whilst I could give a lengthy rationale, the aspect that I find most compelling is that the interests of customers in the longer term are best served by a market for advice where supply and demand respond to clear pricing, and are not influenced by the commercial relationship between distributors and manufacturers.

There are of course challenges for advisers in the RDR rules, but I believe that those who make the transition will find they have more sustainable and valuable businesses as a result.

There are of course various aspects of the RDR that I am unhappy about, and I have a particular concern about the banning of provider factoring on regular premium remuneration. The various changes to RDR that we have called for are set out in our published submission to the TSC which is  freely accessible online.

 Post RDR

It is predicted by the FSA there will be thousands less IFAs post RDR, if you agree with this estimate, then

Is AIFA planning to try and arrest the exodus of IFA firms, and members, likely to go out of business as a result and if so how?

There are a wide variety of predictions about the number of IFAs who will close their businesses but obviously we would want as many as possible to be able to thrive after 2012. The two main challenges for IFAs are reaching Level 4, and changing to Adviser Charging.  AIFA has provided solutions in each of these areas: Fast Forward provides online support and guidance for members who are seeking to transform their business model to one based on recurring revenue, and the Diploma in Investment Planning is a qualification we arranged with the Chartered Institute of Bankers in Scotland to provide a straight-forward and cost effective alternative to traditional exams for advisers currently at Level 3 who want to comply with RDR in a single exam, based on case studies.

What plans has AIFA made to adjust to a different looking financial advisory market and will be the role of AIFA post RDR change?

That is the question at the heart of the strategic review that I announced in December. The market is changing, and the regulatory framework will change too as a result of a new Government, a new regulator from 2012, and the transition of regulatory authority to Europe. The number of IFAs is set to reduce, and the nature of those firms is likely to change too. If AIFA is to continue to represent its members effectively it also needs to change significantly and we are looking at all aspects of the organisation in order to define the most appropriate structure, and member proposition for the future.

Yourself

What is your current greatest challenge as Director General of AIFA?

What would you like to achieve most as Director General of AIFA?

There is a huge amount of work to do at AIFA, both externally and in improving the association itself. The greatest challenge, and the greatest opportunity is to create a better association that offers more to its members, and is better equipped to influence policy in the increasingly complex European environment that is becoming our primary regulator.

After a successful career spent within a well-paid and supportive institution, do you have any regrets about taking on this difficult job?

It is a very important role for the IFA community and it was an honour to be asked to take it.  Every day presents new experiences and challenges, and I am very grateful to have such a capable team around me.

Working in a large institution, as I did, does have its advantages – but there are also drawbacks, and life in a complex and process-driven corporation generates its frustrations as well. I have worked in  small companies before (in fact I worked on my own for a number of years as a management consultant) – of course there are many responsibilities, but there is more immediate control too.

I didn’t imagine this role would be easy and I was under no illusion that it would make me popular; IFAs are a diverse, and passionate community that I have worked with for nearly 30 years, and it is impossible to please everyone.  One member of Council told me that the best advice he could give me would be to ‘grow a thick skin quickly’, but in reality the engagement with members is one of the most rewarding aspects of the role and I enjoy the debate.

Regrets? Well if I hadn’t thought this would be a tough gig, it wouldn’t have interested me.

FSA/FCA, RDR