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FSA plans six-month ceasefire before RDR offensive

by Michelle Abrego on Jan 29, 2013 at 10:45

FSA plans six-month ceasefire before RDR offensive

The Financial Services Authority (FSA) will not take enforcement action against advisers for the first six months of 2013 in relation to its thematic reviews into professionalism, charging structures, independence and non-advised sales.

Earlier this month, New Model Adviser® revealed that the regulator will conduct four thematic reviews in three cycles this year to monitor that advisers are adhering to the retail distribution review (RDR).

The regulator has moved to reassure advisers that it will not take enforcement action over confusion it uncovers when conducting the first cycle of thematic reviews.

However, where the regulator discovers a firm deliberately flouting the RDR rules, for example by giving advice without the proper qualifications or continuing to take commission, during the course of normal supervision or the thematic reviews, it would take action, a spokeswoman for the FSA said.

She said: ‘We don’t intend on taking enforcement action in the first cycle of the thematic reviews, the first six months, unless we find some really egregious practices.’

After each cycle, the FSA will publish guidance and examples of good and bad practice.

‘If at that point we find people aren’t taking note then we might come down slightly harder, but we understand that this year people are adjusting to the new market conditions, the new labels, and we want to help, not just run in heavy handed,’ said the spokeswoman. 

In an effort to help advisers understand the new rules, the FSA plans to publish a series of Q&As featuring answers to IFAs’ most commonly asked questions. The first of these was published last week, answering questions on independent and restricted advice, adviser charging and professionalism.

Despite the FSA publishing its final guidance on independence and restricted advice in August 2012, advisers and lawyers have raised concerns that the rules lack clarity and could be misinterpreted.


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44 comments so far. Why not have your say?

Bob Donaldson

Jan 29, 2013 at 11:09

Not really a good choice of headline Citywire. I don't think that advisors are quite at war with the FSA over the RDR, we just won't be hugging them anytime soon!

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Jan 29, 2013 at 11:12

Well, congratulations FSA, seems there is some commonsense bieng shown. Keep it up!

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Simon Webster1

Jan 29, 2013 at 11:14

Bizarre - doesn't the FSA cease to regulate on 1st April 2013?

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Ewart Matthias

Jan 29, 2013 at 11:16

Must the headlines be so sensational?

‘If at that point we find people aren’t taking note then we might come down slightly harder, but we understand that this year people are adjusting to the new market conditions, the new labels, and we want to help, not just run in heavy handed,’ said the spokeswoman.

This doesn't exactly say we are at war does it?

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Mad Eyes

Jan 29, 2013 at 11:17

Ha!! Sounds like a case of ''not on our watch''

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Alasdair Sampson (FinServ Solicitor)

Jan 29, 2013 at 11:23

I regret to be the guy that flings the wake-up bucket of chilled water over IFAs – but this assurance from FSA has to be read subject to the all important caveat – “unless we find some really egregious practices”

That leaves it open season.

“Egregious” is one of the in-FSA words at the moment – it pops up everywhere, usually in conjunction with a sharp intake of regulatory breath. Half the time the user doesn’t have a scoobie what it means.

This statement is nothing other than window dressing intended to give the impression that the FSA/FCA are caring and sharing.

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Julian Stevens

Jan 29, 2013 at 11:34

FSA, FCA, much the same thing really, except that almost all the architects of the RDR have jumped ship instead of staying on to see through its implementation. There's a new captain on the bridge, but what else is set to change?

As for use of the word egregious, of the many definitions available online, the one that seems best to fit the FSA is "Conspicuously bad or offensive" ~ don't you think?

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Paul Barnard

Jan 29, 2013 at 11:37

I hope they come down like a ton of bricks when they find egregious practices going on - those of us (in the majority) who try to run our businesses correctly should not shed any tears for the charlatans and crooks that might remain in our midst.

Interesting to see a solicitor berating someone for the non-use of simple English though!

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Jan 29, 2013 at 11:37

Wow, sounds like we're at war! Wish someone had told me, I totally forgot to barricade my offices today!

Its more sensational thatn the daily sport here these days.

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Kate Brookes

Jan 29, 2013 at 11:44

Oh that's a relief, I shall leave my flack jacket at home for the time being then. Ridiculous language...ceasefire. A bit offensive when you consider it's hardly comparable to Mali or Syria don't you think?

I don't see that they can do anything else, they can't use the evidence of a few months KPI's to prove an adviser is independent or not surely. I personally think they should take a year to let it all shake down. Anyway, didn't the FCA say they are going to be much more 'touchy feely' with us? ha ha

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James Barr

Jan 29, 2013 at 11:47

calm down its only a commercial

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sol trader

Jan 29, 2013 at 11:57

I always mix up egregious with gregarious, sometimes with hilarious consequences..

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Jan 29, 2013 at 11:58

.Paul Bernard - much as I would like to agree with you whole-heartedly, it is (sadly), naive these days to think that running your business correctly is any defence in the face of mercurial and oft disguised goal posts wrapped in invisible barbed wire.

Be afraid. Be very afraid

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David Banks

Jan 29, 2013 at 12:00

Haven't IFAs had long enough to prepare for this? It's not like they didn't know what the deadline was?

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Alan Lakey

Jan 29, 2013 at 12:08

Many advisers do consider themselves at war or, at the very least, bunkered down until the shelling stops.

With 20/20 hindsight (which only consumers and regulators possess, apparently) the whole of the RDR thinking springs from the reality that as a regulator they are naff and should have stamped on bad practcie from day one rather than berate the 99% of good advisers with a nail-studded stick

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Mark Angus

Jan 29, 2013 at 12:13


Just sometimes?

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Knowledgable insider

Jan 29, 2013 at 12:25

Anyone with any knowledge of the way this industry works would know that many of the problems the FSA claims to be tackling such as high commission charges could easily have been dealt with by simply applying an industry wide maximum initial commission charge. But no that would have been too easy and would not have required as many FSA staff and therefore jobs might have been at risk!! So instead we are buried under this heap of rubbish taht keeps them alll gainfully employed. The Government has more to do with all this than meets the eye as I cant believe they have not been made aware of the possible consequences of all this stupidity i.e. huge job losses and the lack of advice to smaller clients. If they claim not to know then they are supid, if they do know and go along with it then they are as incomepent as the architects of this mess and should pay the price at the enxt election. The architects may I remind you have all now left to even higher paid jobs before the errors of their ways become evident!!!

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Jan 29, 2013 at 12:40

Alan, dont be ridiculous, this isnt war. We're all just a bunch of disgruntled business people sitting in suits in comfy offices. War is hell, and fought by heros.

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Mr Man

Jan 29, 2013 at 12:41

Calm before the storm?. Currently In the eye of the hurricane? The FSA/FCA gain plaudits from "headlining" bans, fines (that's how they get paid) punishments,public criticisms. Their careers are made on your public spankings. Books down trousers won't work...Leave the UK regulated industry and spank them back with non regulated advice. I attended an overseas seminar in an emerging market. Its their intention to promote their non regulated market. "The UK has over regulated itself in financial services". The baby is flying out the bath with the water."

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Ken the Beckett

Jan 29, 2013 at 12:49

Can someone tell me what relationship Dr Peter Williams has to this article? I'm pretty sure he wasn't the spokeswoman!!!

Trust you are keeping well Peter.

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Jan 29, 2013 at 13:03

32 years in this business, passed all my exams etc, but still needed to look up the meaning of this spooky word 'egregious', silly boy should have concentrated more at school, or sign up for more CPD English.

Oh dear and I though I was becoming somebody!!

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Alasdair Sampson (FinServ Solicitor)

Jan 29, 2013 at 13:04

@ Paul Barnard

If you think that’s me berating the FSA/FCA…..you should really be a fly on the wall when I meet with them sometimes.

Seriously, the problem is not the language itself but the interpretative standards that are subjectively applied by different officers that creates the inconsistency.

Oscar Wilde (I think!) is quoted as saying that a newspaper cannot tell the difference between a bicycle accident and the end of the world – both described in the same lurid sensational terms

And that’s how FSA often but not always operates – even the most innocent of matters suddenly gets inflated and exaggerated beyond any reasonable interpretation. If you don’t believe me ask an IFA who has had a supervision review and how the subsequent report is worded.

When there is no consistent interpretive standard, often linked to an individual officers ignorance of the law and the rules, then I regret to say that complying with the rules to the best of you knowledge and understanding of them, and even with the most detailed written/electronic files, is no defence to the applied regulatory standards of 20/20 perfection of hindsight.

@ Julian

Sorry to correct you but “FSA, FCA, much the same thing really” isn’t wholly correct – they ARE the same thing.

Section 1A(1) of Financial Services and Markets Act 2000 (as substitutes by the Financial Services Act 2012) says:

“The body corporate previously known as the Financial Services Authority is renamed as the Financial Conduct Authority.”

In plain English – the FSA is just changing its name.

@ Kate

It would be naive of you to think that the FSA cannot use the evidence of a few months KPIs to “prove” and adviser is or is not independent.

You would be surprised just how creative the FSA Enforcement mind can be with just one teeny weeny fact or slip or word out of place.

The seminar attended by Mr Man may well prove to be correct – that the UK market has been over regulated in which case the indigenous market players will suffer.

@ Knowledgeable Insider

I have to confess to being moved by your obvious belief that the UK electorate will be able to make the intellectual connection between the parlous state that the UK advisory market may well be in by the time of the next election and the efforts of the government of today that may bring that parlous state about.

According to the FSA/FCA and indeed the FOS, the average investor doesn’t have the intellectual stamina to read to the end of a 6 page document or to understand anything that is written in other that P1 monosyllabic terms.

No, sorry to say….the diminution of the number of IFAs will be seen to be your own doing, probably as it will be portrayed as such.

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Gillian Cardy

Jan 29, 2013 at 13:15

@knowledgable insider - the OFT removed the MCA and has persistently remained implaccably opposed to reinstating it - even though it's blindingly obvious that removing the cap didn't make commission go down but merely facilitated it going up ...

@Barman : I shall tell my better half that someone is able to tell the difference between "war" and war ... when he next phones home from Kandahar :-)

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Jan 29, 2013 at 13:49

@Alasdair Sampson

The FSA/FCA is a continuation for sure, but it appears to be a good thing for you and similar legal practices. It is already aparant the FCA is going to slam down on the cowboys who wreck our reputation and industry.

For the FCA will be closing dodgy schemes down and asking questions later. This means all the dodgy UCIS inside a SIPP cowboys will be beating a path to your brass plate to take advantage of your obviously superior intelect. 'How dare the FCA shut us down' they will say, 'We met all parts of COBS and all other relevant parts of the handbook'. 'We can't be responsable for investment performance, especially if the client requested self select investments'

So you can earn a heafty fee defending them against the inconsistant decision making of the regulator, pointing out their ignorance of the law and the limitations of their remit.

So bonanza time for you.....Congratulations!

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Jan 29, 2013 at 14:11

Hikky, dear boy, do calm down, I can see the foaming from here! Did a solicitor jilt you in love or something? ;o)

Joking aside, I know Alasdair is perfectly correct in what he says; I've seen it happen to good, honest and diligent advisers. Don't worry. Your turn in the Barrel - and mine - will come. No matter how squeaky-clean you think you are, they will find something to scare you sh*#less with. That's a promise.

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l'ifa passeport en provenance de France

Jan 29, 2013 at 14:32

I've just recently had a very positive meeting with the FSA ! more like a business consultancy really, very helpfull

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Jan 29, 2013 at 14:35

@ Polfers

I don't know what you mean? An encouraging comment aimed at one of my regular corespondants is only meant to aid and abett his search for an increased income stream.

Luckily no jilted john here, I have always had the good fortune not to be involved with a lawyer, although some of my family do practice.

I know pleanty of good, honest and diligent advisers reduced to apoplectic jelly following contact with the FSA. Me, I feel I recognise their (and my) shortcomings and make allowances for the regulators idiosyncratic stances, and make sure my advice suits my client first and foremost. If the advice is off piste, I go out of my way to ensure it complies and my client is happy. Great forests of trees are then sacrificed in the name of regulation, and the rictual of reading the recommendations can be a two cuppa event.

Embrace regulation, don't fight it! What can they do? I can earn nearly as much as a cabbie.

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Alasdair Sampson (FinServ Solicitor)

Jan 29, 2013 at 14:36

@ Hickky

So what would you like to see?

That’s a rhetorical question, of course, as I suspect that I already know. Get rid of all the lawyers!!

The world would be a better place, eh Hickky?

Who would then assist and advise you ? Please don’t think you can defend yourself – too often I have to try to pick up the pieces after. Any lawyer knows that if he defends himself he then has an idiot for a client a fool of a lawyer.

The system you work under is not of my design – and I am on record over many years as saying that it is an affront to any sense of justice, and little more than the Star Chamber – but it is what it is.

It is based on prescriptive law and regulation and when it comes to enforcement it is almost as legalistic as any judicial process – but without much/any of the balance and innate fairness even in a criminal investigation and prosecution in which an accused has more rights to protect him than does an IFA.

When I am consulted by an IFA firm the first thing I tell them is not to assume I know their job as financial advisers, I don’t, but to treat me like an muppet and assume that I know nothing of the particular investments that FSA are looking into. But I also tell them not to think they know my job – they don’t.

Sad to say, many of IFAs I have dealt with may know where the Handbook of Rules may be found on the FSA website but don’t know their way around it – but too often IFAs don’t realise they don’t know enough.

They think they do, and that’s where often they come unstuck. They think they can answer whatever question the FSA puts, perhaps it’s a trap question, and they cannot help themselves but answer beyond the confines of the question they are asked….and that simply leads the FSA elsewhere, possibly where they didn’t intend to go.

And from what I have read from some IFAs on these bloggs, they simply wouldn’t be able to help themselves just talking themselves right into the deep trouble and may not be even aware of it.

Do remember that when the FSA come chapping at your door – even if it is a routine visit. They will come mob handed and one of them may be a lawyer in disguise.

Smile, Hickky…it may never happen

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Jan 29, 2013 at 14:36

@ l'ifa passeport en provenance de France

I don't doubt it for a moment. My comments stand.

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Julian Stevens

Jan 29, 2013 at 14:46

Perhaps the exception that proves (as in tests) the rule.

It would be nice to think that Mr Wheatley will perhaps foster a somewhat more humanitarian culture within the FCA rather than perpetrating the FSA's policy of allowing its compliance inspectors to behave like arrogant scalp-hunting packs of wolves.

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Alasdair Sampson (FinServ Solicitor)

Jan 29, 2013 at 14:53

@ Julian

Most of then would take that as a compliment.

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Gillian Cardy

Jan 29, 2013 at 14:55

@Alasdair : can you send me your contact details please - a few people have been asking after you and I've struggled to find contact details online ...

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Jan 29, 2013 at 14:58

@ Alisdair

As Polfers said a moment ago, I can see yet another foaming mouth. You better contact the WHO, Rabies (or at least rabied comments) have broken out.

Seriously, my old cock, my comments were not as you implied, aimed as a general dissing of your and others services to the advisory industry, but I would rather you treated it as my 'duty of care' to you.

For it would not be in the true sprit of cooperation if I were not to point out to you some business oportunities available to you shortly, although I fear you may be obliged to obtain your fee in advance, and a no win no fee contract may be inadvisable.

So take the post on face value, you know I have respect for you, but please, don't be so tetchy!

p.s. I have had two FSA visits in my long career, no issues. Lucky or what?

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Knowledgable insider

Jan 29, 2013 at 15:04

Alasdair Sampson (FinServ Solicitor) - I do not in fact believe the average investor has the nouse to understand what and who is behind the inevitable increase in their costs going forward or indeed the lack of suitable and affordable advice. My comments are made to try and encourage the contributors to this blog to place the blanme where it is richly deserved..On the present Government and if only half of the comments made here were directed that way we might start getting somewhere. Its the Organ Grinder we need toi attack and not his monkey.

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Julian Stevens

Jan 29, 2013 at 15:35

I heard an interesting term on the radio this afternoon ~ Benefit:Cost Ratio. Interesting (to me) because surely that should be a key corollary to any Cost:Benefit Analysis.

Now, we all know that the FSA's Cost:Benefit Analysis, on the strength of which it launched its RDR, was criminally skewed, not least because if the Cost part of it had been £2Bn (as it has now become), the whole idea would have been howled down from many quarters, not least because ultimately that £2Bn will have to be funded by consumers.

But we are where we are, so it seems to me that what APFA et al should be calling for is for the FCA to undertake a follow-up study at a set future date to establish a Benefit:Cost Ratio. The benefits side of the equation shouldn't be very to quantify. It'll come down primarily to the proportion of all transactions, whether quantified in numerical or monetary terms, that result in positive, as opposed to negative, consumer outcomes. Has the RDR saved at least what it's cost in terms of reduced consumer detriment ~ bearing in mind that whatever goes wrong, at least as far as any regulated products or activities are concerned, the FSCS (or our PI insurers) seem to fork out for anyway and then bills the rest of us.

There is, of course, a risk, namely that the regulator will seek to wash its hands of any responsibility or its own failings (of which, as we know, the FSA has a long and exceedingly irksome history, not least ArchCru), dumping all blame on the intermediary sector and proclaiming this to be why the industry needed the RDR. Perhaps if the FSA had done its job considerably better, the industry wouldn't actually need an RDR.

If we could just get a new policy of honesty and acceptance of responsibility on the part of the regulator, a Benefit:Cost Ration might just be something worth trying to secure. Whether or not this would throw up anything unexpected, as in the RDR has cost vastly more than the value of the benefits it's accomplished, is another matter. But it's surely something that the regulator should be required to produce to justify its actions.

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Jan 29, 2013 at 16:04

OK - enough already! Jeeze!

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Tim Page

Jan 29, 2013 at 16:19

Definition of egregious:

1outstandingly bad; shocking: egregious abuses of copyright

2 archaic remarkably good.

Which version does the FSA mean? :-)

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Jan 29, 2013 at 16:26

The bad one Tim, the bad one.

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Alasdair Sampson (FinServ Solicitor)

Jan 29, 2013 at 16:27

@ Hickky

If I frothed at the mouth, then my apologies.

I am genuinely pleased that you have survived two FSA visits. Clearly, from a regulatory compliance point of view – I wouldn’t dream of commenting on the financial soundness of any adviser’s advice, I am not qualified – you seem to have got it right. More power to your elbow.

The point I seek to make is that not everyone is in the same position, for whatever reason and most often in my experience due to simple human error. There are, of course, bad guys in your profession as there are in mine and it is those bad guys that establish the FSA mindset.

I take assisting advising and defending IFAs very seriously. To me as a lawyer of 35 years’ practice, the system that you all operate under deeply offends my sense of natural justice, the legal principles that I have worked by and any concept of fair play and have said so over very many years. I know of no other administrative system like this. I can only say that when I have tried to explain this system to other lawyers, who are not familiar with it, their initial reaction is simple disbelief.

@ Gillian


And just in case anyone comments – the “fsa” bit of that email address stands for Financial Services Advocacy not to be confused with a well known but not so loved regulator.

@ Tim Page

Hazard a guess......

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Knowledgable insider

Jan 31, 2013 at 12:15

The six month reprieve so generously provided by the FSA is, I have no doubt, to allow them time to understand the mess that they themselves have created. If they commenced with action immediately they would A) not have sufficient resources to deal with all of the errors that practisioners make (that are subject to unterpretation) B) allow the industry and others to witness the massive flaws in their own systems. This whole mess will eventually spill out into the press and clients reactions will, on initial experience, not be complimentory to the FSA. Never mind, sorting out the mess will keep them in jobs for years to come so that part of RDR will work well.

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Jan 31, 2013 at 13:07

Maybe it is because the FSA will not be around in 6 months time and the FCA can bad mouth its predecesser when their rules bite.

Or is it that Martin Wheatley realises what a mess the FSA have made of the rules and wishes his own orginisation to be up and running before amending the regulations.

Just to hear him having to be politically correct this morning on the radio when asked to comment on the failings of the FSA regarding the interest rate swap issue, and PPI he had to swerve the questions, but not with enthusiasm. I recon he could be the one person in regulation with a modicum of common sense and wants to hit the fraudsters and persons with questionable ethics first and not getting too involved with the tick box, petty regulation we have had to put up with for the past 10 years.

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Knowledgable insider

Jan 31, 2013 at 13:22

Hickky - would be nice if you were correct but im not holding my breathe

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Jan 31, 2013 at 13:32


Nor I mine, might choke!

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Julian Stevens

Jan 31, 2013 at 13:47

What we're pleading for is regulation that's:-

1. fair (no more hindsight reviews),

2. proportionate (to the level of consumer risk each sector poses),

3. practical (does, for example, all this crap about CFL, as an adjunct to ATR, really advance the art of financial planning?),

4. transparent (e.g. all feedback on consultations should be published for all to see and to debate in open forum instead of being firmly locked away from prying eyes and casually brushed aside as having been "taken on board"),

5. accountable (to an Independent Regulatory Oversight Committee) and

6. cost-effective (if no more than 2% of all complaints are attributable to IFA's, then surely our share of the overall regulatory bill should be no more than 2%?)

Yes, that's quite a list, but hardly an unreasonable agenda.

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