Why is that such a downside? Well simply because for a while, in what was a very heated debate, it felt like the life offices’ interests and those of IFAs were diametrically opposed. There is certainly no point pretending it was otherwise.

 However, it should also be remembered that Aviva’s position altered substantially after the first heated months and it more or less backed RDR mark two which, while still deeply unpopular in some quarters, was livable with by many others. (How many? Well we will see in the next three years.) Without this compromise ever having been arrived at, I think it would have been very difficult for this appointment to have been made.

Now the upside. Mr Gay is very bright, knows a lot of IFAs, knows the regulator very well, understands how regulation works, and has helped get as many IFAs over the qualifications finish line as possible.

Those skills should not be underestimated. As I have commented before, it was always difficult for IFAs to adopt a position of outright resistance, certainly not through the main trade body. The courts are expensive, there is no option to withdraw labour and nothing to be gained from marching on Canary Wharf. There are, in reality, few barricades to man.

There is the force of argument but sometimes regulators and politicians choose not to listen, so you must oppose unfairness but also try and maintain a working relationship with the FSA.

That would suggest Mr Gay could well be the right person for the job.

Of course, there are practical issues that need addressing as a matter of urgency. As the deadline approaches, and the possibility of IFAs being forced to stop advising, things are going to get very tense indeed. The FSA isn’t helping matters at all with recent remarks over platforms and wraps and no clear guidance on what it is really looking for IFAs to do. Certainly that is the view from advisers on the ground.

The day to day detail could actually be described as pretty hellish for advisers whether over regulatory uncertainty, fears about how the FOS is operating and of course the compensation scheme fiasco and an inflexible FSA.

At the same time, there is an opportunity to influence a change in the whole tone and practice of regulation with the CPMA.

Additionally, the coalition will increasingly find themselves looking for solutions to all sorts of problems including increasing savings, so now may be the time to knock politely and talk to ministers, not try and break the door down.

One thing he must do in no uncertain terms - make sure that he has dug all that Aviva programming out of his system and prove it with his first couple of speeches.

But he’ll not please all of the IFAs all of the time, or even some of them all of the time or all of them some of the time. That is one of the facts of life when it comes to this role.

Before the FSA gets round to a final bout of fining every IFA using a wrap or a supermarket in the country maybe we should look at the specifics of Moneywise IFA’s case.

(Dear reader – this is a very long blog by the way (well over a thousand words) so not for the faint hearted or the Twitterati, so you have been warned.)

I always think it’s a good idea to read the full final notices on FSA fines. I think regulated firms should do so too. Here it is:

http://www.fsa.gov.uk/pubs/final/moneywise.pdf

It may be depressing or even a little ghoulish but you get information in a legal format divorced from whatever message the FSA press team and FSA fines team agree is the one they want to send to the market that particular day. Here is my tuppence, or actually more than tuppence on what it means. In my view this fine breaks down into:

1) a UCIS issue.

2) an issue with exotic underlying investments in discretionary portfolios which were not explained properly.

3) a problem with suitability letters and other communications mostly relating to the platform and indeed problems with the justification for the move to a platform at all.

4) A failure to manage a conflict of interest involving the chief executive and his old wrap firm where he is a non-exec, though it was disclosed.

I’ve put a little dividing line between my remarks throughout this blog and the FSA’s. Heaven forbid they got mixed up! But here is the key passage on the UCIS bit.

——————————————————————————————————————–

FSA notice:

Moneywise did not take reasonable steps in the relevant period to ensure that:

(1)

before including unregulated collective investment schemes (“UCIS”) in its portfolios it understood and considered whether it would be subject to the statutory restriction on the promotion of UCIS to retail customers in section 238 of the Financial Services and Markets Act 2000;

(2)

within its sales process it established and documented each customer’s knowledge and experience of UCIS, so that it could have regard to each customer’s specific information needs when communicating with them about the recommended portfolios and the underlying investments;

(3)

suitability reports and other communications sent to its customers were explicit about the fact that some of the underlying investments included in the portfolios were UCIS which were not in themselves covered by the Financial Ombudsman Service (“FOS”) or the Financial Services Compensation Scheme (“FSCS”);

(4)

it took a structured approach to reviewing advisers’ customer files, giving feedback to advisers, and identifying and correcting deficiencies in fact finds and suitability reports;

Whether or not a customer of the discretionary service wished to understand the nature of the underlying investments in the portfolio, the lack of due diligence meant that Moneywise’s advisers were not prompted to tailor their communications and discussions with customers in a way which met each customer’s information needs and ensured a fully effective discussion of the customers’ attitude to investment risk.

——————————————————————————————————————–

The killer line for me is that fact that clients may have been in investments not knowing they had no FOS and more particularly FSCS protection, certainly according to the FSA. If that is the case, then my sympathy for the ‘finee’ may be draining away.

However there is a little ‘throwaway’ remark later on in the report which is quite interesting in that it is included in a list of mitigating circumstances.

——————————————————————————————————————–

FSA notice:

Moneywise obtained legal advice, after the FSA raised concerns with it, about the relevance of the statutory restriction on the promotion of UCIS and it was arguable that in the specific circumstances the restriction did not apply

——————————————————————————————————————–

Er, that then leaves me in the dark again. So did they or did they not apply the rules? I think this out to be clarified by the regulator as soon as possible. Another way to put the question is to ask if this was a court case would they really have been found guilty in this instance?

Anyway turning to the discretionary service, this seems to be about Brazilian farmed teak. Lovely stuff especially if it means the wild stuff is left alone.

——————————————————————————————————————–

FSA notice:

Whether or not a customer of the discretionary service wished to understand the nature of the underlying investments in the portfolio, the lack of due diligence meant that Moneywise’s advisers were not prompted to tailor their communications and discussions with customers in a way which met each customer’s information needs and ensured a fully effective discussion of the customers’ attitude to investment risk.

4.12.

By way of example, Customer A was advised to invest in a portfolio aimed at customers with a cautious attitude to investment risk. The portfolio included some investment in an underlying fund which itself invested in Brazilian timber (teak) farming. The suitability report sent to the customer stipulated that the portfolio represented a low risk investment and while it included a brief template summary of the underlying fund, it appeared that the customer had no knowledge or experience of such an investment and that Moneywise had taken no steps to tailor the communication to her specific needs.

——————————————————————————————————————–

Now to my mind, I’m not sure if investing in farmed Brazilian teak is, these days, a lot riskier than investing in BP, but a lack of adequate explanation may be a problem. However, it should perhaps send alarm bells ringing for IFAs with other discretionary services regardless of the spread of investments. For my part, I would love to see the whole of the offending portfolio/s and get them independently risk rated. It might ring alarm bells for everyone using DFMs.

We now come to the wrap management. First and easiest dealt with is the conflict of interest issue. In the FSA’s view, Moneywise disclosed the conflict of interest but didn’t manage it on an ongoing basis through its compliance team who were not deemed senior enough to manage it anyway. In this though, the FSA also brings up fiduciary duty on the part of the M.D.

——————————————————————————————————————–FSA notice:

Moneywise did not disclose to customers that Moneywise’s managing director’s statutory duty on the board of the platform provider was to represent the shareholders of the provider, and was potentially misleading its customers by stating that his role was to represent the interests of investors;

——————————————————————————————————————–

This is a very literal reading of fiduciary duty but it may well be the correct one. To that end, therefore, I am not quite sure whether any firm can have any such dual relationship within financial services, certainly not if the FSA comes calling. Is it credible for a firm’s director to be telling clients: ‘I’m on the board of this other company so rather than representing you, I’m actually representing those shareholders’. I wonder how many arrangements of this nature there may be and if that means more non-exec relationships need broken up or seriously vetted? There are certainly a lot of those relationships within the business to business world but presumably it is only a problem where one is an adviser firm and the other part of the client offering.

Then comes the big frightening platform issue. The issues raised here echo last summer’s platform paper.  I’ve joined two bits of the notice here.

——————————————————————————————————————–

FSA notice:

Moneywise did not have in place a sufficiently structured approach to reviewing client files and identifying learning and development issues for advisers as the business model evolved, which resulted in the failings in the suitability reports issued by its advisers. Consequently, its suitability reports and fact find documents contained errors and omissions which were not routinely identified and corrected.

Moneywise failed to ensure that its compliance function developed in line with the changes and developments in its business model, in particular, moving to platform-based investments and changing the composition of underlying investments in its range of portfolios. Consequently, Moneywise did not make effective changes and enhancements to its sales process, compliance monitoring and Training and Competence regime to help manage risks relating to due diligence, demonstrating the suitability of its advice, and disclosure of information to its customers.

And:

Moneywise’s systems required each of its advisers to send a suitability report to each customer detailing the recommendation being made by its adviser. In each of these suitability reports, Moneywise failed to:

set out in detail the reasons why Moneywise considered it more suitable for each customer’s investments to be managed on a wrap platform rather than remain in their current location or being placed in alternative investment funds;

tailor its contents to each client and remove parts which were not relevant because of the template-driven nature of the detailed suitability reports it provided;

differentiate between the template descriptions of risks associated with investments according to the levels of each customer’s risk appetite;

clearly state in one place what the actual overall cost to the customer would be, although the fees and charges associated with each underlying investment were disclosed individually; and

break down the amounts or percentages invested in the various funds accurately.

——————————————————————————————————————–

Messing up the percentages is a bit rubbish of course. Indeed not properly managing the transition in terms of suitability and fact finding leaves a lot to be desired too.

But I have a real concern about the FSA approach. By and large Moneywise is attempting a move – indeed several moves that it is convinced are in the client’s interest – not against it. It is taking, I think, a more uniform approach to providing advice and certainly investment with a series of portfolios, generally regarded as the proper investment approach. It isn’t simply fund spotting or performance chasing. But it may be that because it isn’t making that investment totally bespoke, then it is falling foul of regulation.

I know this firm does seem to have goofed royally in a few places, but would the FSA prefer adviser after adviser within the firm to be creating their own investment strategy for each client regardless if that ends up with a different strategy for each of the 500 or so odd people involved.

I get the feeling from this notice and indeed the other FSA statements this week, that it is on a quest for the perfect adviser and the perfect advice.  It may be searching for the perfect transition. But even if it is possible, which I doubt, fining isn’t going to get anyone there any faster.

Gosh.

Now this has a financial services implication. First, it could, though it probably won’t, give an excuse for some restrictions further down the line. This would be, as I think almost every adviser understands, very bad news.

This FoI legislation has proved to be one of the few checks on the FSA and to a lesser degree the Treasury when both have very few checks on their power. Yes it is irritating and occasionally even I have wondered, if quite the right questions were being asked, sometimes about the habits of individual regulators. But we can at least see exactly what the regulator is spending the regulateds’ money on for things that aren’t quite clear in the FSA’s budget.

The greatest shame about the FoI regime is that the Lautro 19 case fell at one of the final hurdles. That really could have been game changing introducing some restrospective fairness into regulation – imagine that. It also is ridiculous that the FOS has not had to disclose the qualifications of its personnel. But at least it allowed us to know that Gordon Brown was warned by officials about the consequences of his pension tax raid. (That was down to a very good friend of mine at the Times, who you may remember from her days on Financial Adviser, Helen Nugent.)

I don’t, unfortunately, think it has been as effective as it might have been. This is partly because the information that shows FSA incompetence often makes front page news say on Money Marketing or front of site news on Citywire but not in the nationals. It means that the embarrassment isn’t always enough to change behaviour even at an ‘evidence-based’ regulator.

But it has been something at least.

I have also heard a lot arguments about the cost of such requests. But I would simply repeat the argument of a finer journalist than me Heather Brooke, (she who broke the expenses scandal) who points out in her book The Silent State, that for every FoI employee, central Government employs 12 press officers. In effect the Government employs 12 people to tell you want they want you to hear for every one they employ to help you find out what you want to hear.

I will now give a personal view on the big stuff.

The amount of spin, the influence of senior press people actually damaged the fabric of our democracy during the Blair and Brown years. The Freedom of Information Act made it a bit less bad, thank goodness.

OK. It is not been quite so bad at Canary Wharf but it is as I say a useful tool. I must think of a request or two to put in – something a bit more specific but along the lines of  ”about that financial crisis which you failed to spot how exactly did you manage that?”

Blair adds:“(Brown) was in favour of rebalancing rich and poor in provision of the basic state pension. I was totally opposed to that. I felt the public at large would consider the basic state pension as their ‘dividend’ or ‘entitlement’ for their national insurance contributions.”

I will investigate this further but to me that reads like Brown wanted to rebalance - for which read redistribute - the state pension, which means he was suggesting even more means-testing.  

Now this may all have been simply a matter of trying to obstruct a reform Brown didn’t like. Certainly I don’t remember any such plans leaking. If it had, surely the headlines would have read “Brown wants to means test the state pension.”

It is however eerily similar to an accusation Blair made in public about the Tories’ pension plans just before the 1997 election, though in that case it was ‘privatise’ the state pension not means-test it.

Still it’s good to see how pensions didn’t become a political football between the various New Labour factions.

We now know that Tony Blair felt he was effectively blackmailed by Gordon Brown over the Government’s policy response to Adair Turner’s pensions review.

Gordon Brown allegedly suggested that he would push forward an internal Labour party investigation into loans for honours if Blair embraced Turner. Blair did. There was an investigation. Anyway this much we know from today’s papers.

No-one says exactly what it was Brown objected to about the pension reform. Just Adair Turner himself? The suggested need to increase the state retirement age? The perceived difficulty of balancing the need for a low cost pension with need to incentivise existing distribution (that’s you) to distribute something? It could be Turner’s criticism or at least concerns about mean-testing? That could be it. 

Yet it might simply be the fact that the proposed personal accounts as became Nest/auto-enrolment system wasn’t Brown’s baby and in Brown’s mind he was chief executive and Blair just the Chairman in charge of stuff like badly planned wars.

Maybe Brown saw all sorts of problems with implementation and political risks. (He’s not a complete idiot) 

Anyway it might, at least, for historical interest be good to know.  

Of course, no-one bothers to ask or at least not the political correspondents in the Telegraph or the Guardian. Row over pensions. Who cares? Tell us about the tantrums, the blackmail and Blair’s dangerous drinking of a gin n’ tonic and half a bottle of wine a night. Hardly Churchillian.

Anyway, I would like to know what the row was about. It might, just, tell us something about the here and now of pensions.

Might have to buy the darn book. At least the money’s going to the British Legion.

Any complaints system, any Ombudsman system, particularly a free one, ought to tread carefully. It has to promote its service – better than the alternative of course, but it has to be careful not to stir up unfair claims. This shows it isn’t doing anything of the sort.

I think it is also time that the FOS adjudications were vetted, i.e. take a number of files across different categories of cases, and have them checked for fairness to both parties to the dispute and for consistency.

Whether you want a FOS to exist or not, if it is run the wrong way it is a huge drag on saving and investing levels, it makes doing all sorts of business for all sorts of companies less viable. It can at its worst greatly increase all the various gap, savings, protection advice.

Someone influential needs to take a long hard look at what it does. This farce is just one symptom of how things may be going wrong.

Here is the story from pensions journalist Helen Pow who is unfortunately leaving these shores to return to Oz. Story wise, this is a cracking parting shot.

http://www.moneymarketing.co.uk/pensions/govt-cracking-down-with-tough-line-on-omo/1017420.article

It is good news that ministers are getting so exercised about people not exercising OMO. The Money Debate has been arguing for this too, asking why on earth, when lawyers and claims chasers are talking of legal action against firms for not properly informing about or processing the OMO, regulators haven’t stepped in to make sure it happens. It is better than have things sorted out after the fact by ombudsman or courts or some sort of class action.

Actually in the recent weeks, the Pensions Regulator has issued new warnings to trustees. So there is one tick at least.

Of course, with this story, we are a bit at one remove from the Minister. We know what he thinks because the ABI told its members and a journalist got hold of it, but, with apologies to Mr Hoban ( for not quite knowing what was said) we still think in many ways his message needs a little bit of finessing.

To consider a broad reform of the market you need to take this issue in its parts. (Once upon a time, they would have been stakeholders. Let’s not call them that.)

First up the ABI and its members. This is the ABI membership. Centrally, the organisation is clearly trying to get everyone to meet as high a standard as possible. It just hasn’t managed it yet. Given the current situation the members would be mad not to pay heed. The minister is making them an offer they can’t refuse. Surely there is a need for some chief executives to make a few calls to some other chief executives and move things up a gear.

But there are other groups Mr Hoban should consider such as…

Non-ABI providers. I suspect some of the worst laggards may be in this group – for example closed offices. Perhaps this area needs a proper look across the piece in terms of TCF not just around OMO. This may also be the case with bank-sold pensions and their OMO information.

The whole raft of non-DB company pension schemes that are not ABI administered, needs examination too in terms of how they have been set up and what is offered when a pension is taken. Some offer limited panels for example to cover enhancement but are they wide enough?

Then the advised market needs to be considered. For those with enough cash to pay for full advice they should expect the best advice. Hopefully, mostly, they are getting it.

But what about small to medium pots? Anyone looking at this needs to consider the fact that the advice sector is in RDR-shock at the moment, and all the emphasis is on shedding clients to survive. Not a good place for OMO. What about where a plan has been set up by an adviser firm that is now defunct or in its fifth or sixth manifestation or an adviser at his third or fourth firm this decade? Those are pretty big strains on the lines of communication and there are no easy answers to it.

At least we have the annuity supermarkets and perhaps in future some sort of guided architecture that could help in this area though of course people need to realise OMO is an option even to get to the stage of comparing rates.

The Treasury and ministers may feel it does not have the time to look at all this in detail. Then again if it is serious about changing things, it will take a lot more than simply putting the frighteners on the ABI.

* And in a related issue – in the column I write each week on FundsNetwork (a relatively tongue-in-cheek look at financial services) I suggest we need someone to advise the Government on all this pension stuff. I suggest a Pensions Merlin (I really think the term Czar is inappropriate) For those of you who have not read enough of my wise words on pensions today already, here is the URL.

https://www.fidelity.co.uk/adviserservices/news-insights/expert-opinions/john-lappin/john-lappin.page

I must say first of all I am not entirely convinced the focus on Mr Sants is correct. Yes he did not step in and address some of the clumsy FSA handling of the IFA market that had characterised the years before he took over.  Nor did he immediately set about solving the financial crisis. He came from the wholesale markets part of the regulator too, and thus shares responsibility for some of the FSA’s spectacular misses and own goals but it is shared with an awful lot of people in the UK and worldwide.

Mr Sants probably did a pretty good job during the storm. (I suggest Howard Flight’s opinion on this is worth checking out.) I am not sure his experience should go to waste entirely. I think the problem lies with the structure not the personnel.

Where I have questioned the Sants and Turner show a little more was over the way they had set about reforming the FSA post crisis without actually having the sort of debate necessary with everyone else, the regulated and consumers and politicians, about how to take things forward.  Actually Mr Turner has made comments recently suggesting that debate is being opened up.

It is here where I think IFAs have to be alert to what is required. Whatever happens, the creation of the CPMA and shake up of the other institutions is a huge opportunity to influence things. When IFAs set out their grievances, regulators and politicians should always have paid more heed to them, often some of the  answers to what was going wrong with regulation lay with understanding those complaints. All too often they were dismissed.  But IFAs also have to come up with some answers suggesting how regulation should change, and finally and most ackwardly suggesting how some of the things that have gone wrong to the detriment of clients could be dealt and avoided in future. That is not easy in a petition, indeed I am not criticising Neil’s complaint. But he and others need to suggest new ways of doing things as well, if they are really going to be listened to.

I think two things are important about the restricted – independent debate.

1)  Restricted, as Aifa says, is challenging – same exams, same adviser charging but by not having to research a wider market it may be a bit cheaper as a business cost. This, in an IFA market that has already been decimated at least, might make the difference between an adviser’s survival or not. If it was the difference, then the Money Debate would say go restricted. It may however be only a marginal calculation for most firms rather than the difference.

2) The second important issue is whether there is a risk that some ‘disreputable restricteds’ might come into existence. It is more difficult to work out whether ‘disreputable restricteds’ are as easy to construct as the ‘dirty multi-ties’ that myself and other journalists used to talk about at the time of depolarisation i.e where some fly by night broker might align with all that was wrong for the client and best for the broker pay-day wise. Actually I think most multi-ties, certainly Openwork or Intrinsic or the like, avoided such as situation. Depolarisation improved their offering. So the important question is - could restricted really be abused? I think it is harder to do, but it is surely not impossible. 

All this means is that Mr Cicutti, who can usually seize on the right issue and the right end of it has definitely seized on the wrong issue and the wrong end of it, which is probably quite bad when it’s an elephant in a little room. For those interested, I was actually the editor responsible for poaching Mr Cicutti to the publication – months of tense negotiations in seedy drinking dens in Camden and the like I seem to remember – but I would love to hear his view.