The IFAA, lately Libertatem, is a trade association. Its purpose is to represent and protect the commercial interests of IFA businesses
Whilst there is no shortage of emotional support for our work; the perennial issue of separating advisers from their money has proved challenging. As a result, we have to pick our targets as well do not have the funds and therefore the staffing to handle everything.
One of our most successful campaigns has been The Connaught Fund in which an FSA regulated firm defrauded investors. One of its directors brought the fraud to the attention of the regulator who proceeded to do nothing for 18 months. To cover up the FSA’s embarrassment the Ombudsman blamed the advisers who, unlike the regulator, did not know of the fraud. As a result of our lobbying all the investors had their capital returned.
IFAA has run the All-Party Parliamentary Group for Connaught. There are still outstanding issues; not least the investigation into operation of regulation and the FCA. We continue to take part in this.
The biggest issue facing advisers is the operation of FOS. When the Financial Services and Markets Act came into force 20 years ago; it delivered a profound change in the way Financial Services disputes were decided. Historically, our industry was like every other one, settled our disputes by the Common Law which has been the basis of commercial resolution for nearly 1,000 years.
Most importantly it was the foundation of commerce all over the world. Its greatest feature is that it is seen as impartial and that creates confidence in markets. It is not surprising that many international contracts resolve their disputes in the UK.
The new Ombudsman was allowed to avoid the norms of Common Law, even down to the rules of evidence. It saw its job as “being fair” which usually meant that it looked for ways of grabbing compensation for the complainant, even if there is no legal basis for the payment. It creates a lottery which will impact far wider than disputes and into capital coming into the sector as well as the willingness of the entrants to join the profession.
This year FOS was infiltrated by Channel 4 Dispatches Programme. It showed that FOS did not have staff competent enough to settle even simple cases but it also leaned towards helping banks, lied to MPs and was an unhappy and poorly managed ship.
So, it was almost beyond parody that just after this exposure FOS had its maximum limit of claim increased from £150,000 to £350,000. So, as a business, you can have a debt of £350,000 imposed on your business by someone who is not qualified to decide.
All this impacts not only those adviser firms that find themselves on the end of a claim but also every firm’s PI cover and cost.
The IFAA is developing a new form of resolution based on a tribunal system with a group of PI insurers, Lawyers and compliance staff which would provide both a more equitable platform particularly for the larger cases but also a form of certainty before you give the advice thus removing the wisdom after the event type of regulation.
The Treasury Select Committee has shown enthusiasm for the idea. So, we continue to develop the concept. Hopefully in this Post Brexit world, the politicians will be able to find time to look at this sensible measure.