Q. How and why was the AIFA formed?
It was formed in 1999 to be the single trade body for all financial advisers. We now represent about 70% of the market and are a trade association, which means we do representational work and have information services.
There was a belief that IFAs had been badly served because they had not had a single trade body and a single voice. Accordingly, there were several people feeding in slightly contradictory messages.
With a single regulator that was no longer a self-regulator, this was one body that spoke for the IFA community.
Q. What campaigns has the AIFA been involved in recently?
We have focused very hard on polarisation ‘ in particular, to change some of the retrograde proposals by the Financial Services Authority (FSA) to redesign what comprises independent advice. We have sent in, and will continue to send in, detailed submissions explaining why independent advice should be handled differently to the way the FSA proposes.
We are interested in the way the FSA is setting up the regulation of mortgage advisers as a lot of our members do mortgage business. We want to ensure the rules which are bought in are proportionate and sensible. It is early days yet, as they are still looking at the way forward for regulation, but we have a lot of experience looking at FSA proposals and translating how these proposals will work in practice.
We have also been involved in lobbying with Ron Sandler on the state of the retail financial services and his report, which is due from the Treasury in June.
Q. What are your views about the Treasury’s plans to regulate mortgage advice?
It is a huge challenge for the FSA to get it right, as so many more people will fall into the bounds of regulation. It will need to ensure that it does not over-regulate by nit-picking and implementing too many detailed rules. The regulator will have to stay at quite a high level so it does not become totally bogged down in the process of regulation. I can see why the Government asked the FSA for regulation of this sector ‘ because of European pressures ‘ but it is a big challenge for the FSA while it is still getting the remit right. Proportionality is the key word ‘ do not fix things that are not broken.
Q. As a panel member of the MCCB, do you think there will be a role for the board once the FSA’s regime begins?
The evidence is that once the statutory regulators pile in, self-regulators get pushed out and I am sure that the mortgage sector will not want two regulators falling over each other. But I am sure that the experience and expertise of the MCCB will be drawn on by the FSA ‘ as it certainly should be.
Q. Do you think there is a need for a new trade body in the mortgage industry? And if so, who should head it?
I think there is a need for mortgage advisers to be represented effectively and efficiently in context with the FSA. Who should head it depends on the mortgage sector. The key point is that it should be a professionally run trade body, capable of forming good, solid relations with the FSA.
We have a lot of experience in this area and anyone who is considering it should be talking to us as we have a lot to offer.
Q. What are the main challenges facing IFAs at the moment?
IFAs relations with providers are very important. They need to ensure they are as efficient as they can be as there have been glitches in this part of the industry.
There are also challenges from Europe as there are some European directives which open up opportunities for IFAs. There is the Insurance Mediation Directive which is one of the reasons mortgage advice is being brought under the regulatory framework. This will enable people to give advice across Europe and some of the specialist IFAs will do very well through this. The directive is primarily for insurance-linked products but it shows how the European market is opening up.
There is a lot of external pressure for high professional standards. Everybody involved in advice should be thinking how they can better their professional standing, as this is the way the market is going.
In the IFA sector, there is also pressure on margins, particularly commission margins. This is due to market forces alongside a bit of encouragement from the Government. This puts a premium on working together in the industry to find efficient ways of transacting business so that costs are kept down and companies’ profits do not suffer.