FECIF - The European Federation of Financial Advisers and Financial Intermediaries

Editorial - February 2023

Paul StanfieldPaul Stanfield
FECIF Secretary General

Perhaps we get what we deserve?

Back in 2015, a newly-launched UK trade association raised concerns of serious importance that were – and have been - extremely important in other countries too. I wrote about those at that time and many are still issues today; some are even greater problems now, or likely to become so. 

At that time, there were serious concerns in the UK that the regulator that was not accountable to anyone – not even to Parliament and thus, ultimately, not to the populace either. That was (and still is) both a bizarre and frightening situation in a democracy! I argued that this was not just a UK problem, highlighting that ESMA (European Securities and Markets Authority) had been accused – with good reason – of trying to extend the legislation that elected officials and the EU Parliament have agreed within the MiFID II text. Does that ring any bells with regards to some of the actions and activities of the EU regulators since that time?

Advice gap
Back in 2015, adviser numbers had dropped by 12% from the onset of RDR and there were serious concerns that these would fall much further – some expecting a loss of another 20%, or more. One of the major resulting worries of that decline was a widening of the advice gap. Thankfully, that expected reduction of adviser did not happen and, in fact, overall adviser numbers were actually a little higher in 2022 than at the commencement of RDR. However, somewhat ironically, the advice gap has still widened, as UK advisers have increasingly focused on ever-wealthier clients.  I suggested that other regulators should be very aware of this outcome, not least when assessing the possible effects of a commission ban in their respective countries. And yet, what is happening in the EU right now….

In addition, UK adviser numbers were already much lower at the onset of RDR than they had been many years previously – mostly due to earlier, creeping regulation. In the EU, the national associations that are members of FECIF have generally seen similar falls, not least following the inception of MiFID II and the IDD.

Regulatory costs
These had increased four-fold in the UK in the few years running up to 2015 and have “grown” further since. We have subsequently seen somewhat similar cost increases, direct and indirect, for adviser firms across Europe. It is not, as one might say, rocket science to deduce that if adviser numbers continue to drop in the EU, these costs will therefore become shared amongst a decreasing number of advisers. This could lead to a spiral of decline in which the fixed costs of regulation are chargeable to a much smaller number of firms. The costs of doing business in the future may make it impossible for them to operate!

Impartial advice should be available to the widest number of citizens possible and it is in everyone’s interests that the industry offers trusted solutions that create independence from state welfare for the populace. If regulation results in protecting a smaller number of people – because it excludes an increasing number of consumers from accessing financial advice – surely that is a failure; not least as it is the masses that are often the ones that really need access to advice, allied to sensible protection. And all of this is in the name of Consumer Protection!

I felt that, back in 2015 in the UK, there was an excellent opportunity to make regulation far more accountable, not least as there was a majority Conservative government, which had promised the voter considerable deregulation ahead of its most recent election win. There was a need to ensure that the election rhetoric was converted into action. One could argue that, looking back now, it was clearly just rhetoric.

Whilst such national situations didn’t exist - and haven’t existed - everywhere in Europe, of course, there were still opportunities, I thought (hoped?). For instance, around that time, we had the REFIT initiative, the European Commission's Regulatory Fitness and Performance Programme. This was prefaced on the fact that there is a need “to make EU law simpler and to reduce regulatory costs, thus contributing to a clear, stable and predictable regulatory framework supporting growth and jobs”. With hindsight, I would have to say that this now seems predominantly like just rhetoric too!

So, what was I really saying then – and what am I still saying now? I was (and am) stressing the need for coordinated action, and the importance of active and effective representation. This can only happen if such representation is strongly supported by the advisory sector.

Such support has been patchy at best, over the years – and thus the effect of representation has been impacted; although the adaption and amendment of much EU regulation during its development has often been due to effective advocacy, in recent years.

Of course, as a Board member of two pan-European trade bodies (FEIFA and FECIF) you might think that I am bound to argue that (and possibly also thought it in 2015, if you read the original article). Given those roles you might feel that I am not entirely objective. In some ways that is probably true but I would maintain that my involvement in these entities is and has been, in major part, because I see the need for our sector to stand up for itself. I think that is about as objective as you can be.

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