2nd December 2009

TIFAF - Treat IFAs Fairly

There is considerable concern that the FSA is not treating IFAs in the same way that it is seen to treat banks.

Feelings are running high that week after week small IFAs are seen to be falling under the “cosh”- with good reason we assume - yet nobody hears of a bank, its directors or staff being the subject of disciplinary actions such as removal of permissions, after all what does a fine mean for a bank?

This week has seen the Financial Services Authority (FSA) ban Northern Ireland mortgage broker Noel Heaney for failing to treat customers fairly - reported by Citywire.

The FSA said it had identified wide-ranging management and control problems across Heaney Finance, based in Lisburn, County Antrim. The regulator said Heaney ‘lacked integrity’ and was not competent to run an authorised firm. They found that Heaney delegated the running of the business to an inexperienced employee and did not ensure his advisers received adequate training and support. He also failed to take remedial action identified by two compliance consultants and the FSA.

‘This is a blatant example of a business man taking insufficient interest in the conduct of business written in his name and ignoring repeated warnings about its deficiencies,’ said FSA director of enforcement and mortgage crime Margaret Cole. ‘Heaney failed to treat his customers fairly and we are holding him to account for it.’

However correct this action is, it has been met with a hail of comments that would suggest that this is the bully FSA at work, bayoneting the wounded soft target, yet they appear less voracious in their pursuit of the bank bosses.

IFA comments such as those below show how the perception of reality, fairness and expectation seem to be worlds apart

1. “One more who didn’t operate properly, well done the FSA. But how about the 1 million bank complaints on your desk? Care to give us all an update on how you are going to protect the consumer from these bank advice complaints? How about a progress report please? I haven’t seen one high street bank reported on here that you have tackled, with over 1 million consumer complaints there are no bans? No massive fines? No suspended trading until they right their wrongs”?
2. “Well said. I am so tired of hearing about another broker being fined and banned when the banks are ignoring the TCF rules constantly. Please do give us all an update of a bank being treated the same as a broker when the rules are not adhered to. I am sure every broker in the country could give you plenty of examples if you have misplaced the million or so complaints that you have already received. Is it a case of using the broker as an example? Do not get me wrong. I do believe that there should be some regulation to ensure that customers are treated fairly, but I do not think it should stop at the broker all the time. When 2012 comes around will it be treating customers fairly when they cannot afford financial advice because there are no commission payments? Maybe the FSA should look at banks and themselves a little more closely before jumping on the broker at every opportunity”.

I am sure that the FSA must have a good reason to justify their stance in regard to the banks but I cannot help being reminded of a quote from Animal Farm- “The birds did not understand Snowball's long words, but they ... accepted his explanation, and all the humbler animals set to work to learn the new maxim by heart. FOUR LEGS GOOD, TWO LEGS BAD, was inscribed on the end wall of the barn, above the Seven Commandments and in bigger letters”

Orwell’s thought here of "Four legs good, two legs bad”, ultimately serves as a controlling device and succeeds because of the ignorance of the working animals.

It is quite right that firms that operate outside of the expected standards should be in trouble, after all, the rules and expectations of the current regulator have been very clear for some time. But, let’s see for the sake of balance and fairness some senior bank staff get caught up in this purging process too.

Adviser Letter of the Week