14th June 2011

IFA Letter of the week: POST RDR TRAIL

For years we have been lectured by the FSA on the evils of upfront loading and the desirability of linking remuneration with ongoing trail. Now we learn that Canary Towers wants to allow consumers the ability to renege on ongoing fees irrespective of what commercial or contractual agreements are in place. The irony is that this will encourage upfront loading i.e. take what you can when you can because you will have no commercial protection if you link your fee to ongoing service.

Again another nail in the coffin of UK regulated advice. Like all bureaucracies what the FSA craves most of all is power. The FSA is a government within a government creating its own mini world of power and legislation. It has its own Star Chamber FOS, its own interpretation of society & law. Not for the FSA a mountain of commercial, contract law and all the legislation behind it.

And all of this takes place under the noses of our "B" listed politicians who are not worthy of their positions in the Mother of All Parliaments. If our own politicians are unwilling to stand up to this leviathan at large then consider this: All 3 aspects of the RDR - prescribing the conditions for a firm being able to hold itself out as "independent"; prescribing methods of remuneration; prescribing criteria for competence - are super-equivalent to comparable provisions in the Markets in Financial Instruments Directive aka (MiFID). Under EU law super-equivalence is not permitted, which is why the FSA are unable to apply their proposed rules to inwardly passporting firms, as this would bring the FSA into direct contravention of Article 31 of the L1 Directive (2004/39/EC).

NB: Firms passport into the UK from the EU just as UK firms can passport into EU states via the UK. This two way traffic is the corner stone of EU law and the principle of trading harmony. This is why the FSA have confirmed they will not be applying the RDR rules to firm's exercising Article 31 rights in their draft notification to the EC (ref CP09/18 Ann B pars 26 and 51). Operating under the rule of law does rather look more attractive than operating under the rule of the FSA don't you think?

http://www.ftadviser.com/FTAdviser/Regulation/Regulators/FSA/News/article/20110606/03583564-902f-11e0-9c73-00144f2af8e8/FSA-changes-RDR-rules-on-ongoing-service-charges.jsp

Best regards

SIMON MANSELL
TEMPLE BAR IFA LTD

Adviser Letter of the Week