Tenet distribution director Keith Richards is spearheading a new lobbying campaign aimed at highlighting the cost and potentially detrimental impact of financial regulation.
While Richards (pictured) was adamant he welcomed the retail distribution review (RDR), albeit with misgivings over how it will work in practice, he insisted this was not the emphasis of Tenet’s lobbying campaign, which instead is focused on the escalating cost of regulation, the continued lack of an adviser long-stop and the effect of regulation on consumers.
The campaign aims to take advantage of Tenet’s size and geographic spread by getting their members to write to their local MPs in the hope they will raise the issues in Parliament.
‘No part of the financial services sector is unaffected by proposed regulatory change and increased costs,’ said Richards. ‘There has been positive feedback as [our point is] put out in a very balanced way, and MPs can start to understand the impact of regulation on them personally or on the people they’ve been elected to represent.’
Focus on costs
Richards is aware MPs have heard the gripes of financial advisers before, particularly on the RDR, which was the subject of a parliamentary debate in December 2010. But he is hopeful Tenet’s campaign will get across the impact regulation, and its cost, will have on the consumer.
While advisers complaining about the Financial Services Authority (FSA) is nothing new, and anger about the lack of long-stop go back as far as advisers’ potential liabilities themselves, Richards argued the emergence of claims management companies has made the long-stop issue more pertinent than ever.
‘It’s progressively getting worse,’ he said. ‘We already have claims management services running after everyone, creating greater levels of mistrust, and more people are making claims when they’re not even sure what they’re claiming on.’
The cost issue is also one that Richards sees no sign of abating. He pointed out that the FSA is set to raise its budget by almost £80 million to £578.4 million this year from £500.5 million in 2011/12, and that with the FSA’s successor the Financial Conduct Authority promising to practice more intensive and intrusive regulation, it was unlikely costs would come down.
Survival not innovation
Despite the firmly anti-regulatory stance of the lobbying campaign Richards insisted he was supportive of the RDR; however he argued that in practice it was flawed in the same way as all regulation, in that by striving to cover every eventuality it creates a series of unintended consequences.
‘The perfect is the enemy of the good, you’ll never have a system that’s foolproof,’ he said. ‘Regulation tries to eradicate anything bad, and as a result it creates all this unintended consequence because it [the FSA] doesn’t understand the impact or the consequences.’
He added that the RDR, while good in theory, meant providers and advisers were currently more consumed by meeting deadlines than bringing about the FSA’s desired outcomes.
‘It’s not innovation, its survival; it’s compliance to the rules,’ he said. ‘Most of [the industry’s] resources are going towards meeting the deadlines.’
Cost is a subject close to Tenet’s heart, and while acutely aware of how much it costs to keep in line with FSA policy, the network has also flexed its not inconsiderable cash reserves recently, announcing an acquisition war chest, as well as investing in increased research functions, a restricted advice proposition, and it has a potential payout or legal battle with the Financial Services Compensation Scheme over Keydata sales on the horizon.
Richards said he was not too worried by the network’s Keydata exposure and insisted that while Tenet would provide a restricted service, it expected the majority of its advisers to remain independent after the RDR.
‘From our perspective we’re predominantly supporting independence going forward, we built our structure around advisers who want to maintain an independent status,’ he said.
Keith Richards CV
Tenet, distribution and development director
Tenet, sales and marketing director
Royal London Group, head of retail sales
Royal London Group, head of salesforce operations