In its response to the Financial Conduct Authority’s (the UK financial regulator) consultation on the Financial Advice Market Review (FAMR), CISI raised its concerns about a proposed ban on accepting inducements.
It said: “Whilst extravagant hospitality gifts and monetary inducements are clearly unacceptable, the banning of inducements outright is likely to have unintended consequences. If firms feel as though they cannot take a client, competitor or supplier out for lunch, or accept a space at a conference, for example, then opportunities for people to understand each other will be missed.
“These activities offer the possibility of collaboration, communication and development, which ultimately benefit the end user, and an outright ban may prove to ultimately disadvantage consumers.”
CISI also questioned the FCA’s proposed approach regarding qualifications. The regulator is suggesting that training and competence requirements apply only to those staff who provide “personal recommendations”, as opposed to those who only provide guidance.
This relates to staff who advise customers along the lines of “this is what I think you should do”, versus those who say, “this is what you could do”.
“This move is counter-intuitive and could result in a detrimental end result for consumers,” CISI said.
“Customers expect to deal with suitably qualified professionals, who they trust, when having discussions about their finances. In the light of a long list of mis-selling scandals there is still a lack of trust in financial services by consumers and narrowing the scope of training and competence (T&C) requirements is unlikely to do anything to help restore the trust.”
CISI also noted: “Whilst there will be many informed consumers who will appreciate the difference between recommendations and guidance, there will be many (perhaps more) who are not aware of this subtle difference. In any case it is our belief that clients would expect the individual they are dealing with to undergo T&C and have relevant qualifications, irrespective of whether they are providing recommendations or guidance.”
Simon Culhane, CISI chief executive, said: “We are not convinced that the FCA has analysed exactly how these two issues, of banning inducements and restricting qualifications, are likely to ultimately hurt the end user, the consumer.
“The proposal, in particular, sends the message to firms, professionals, employees and consumers that training, competence and qualifications are unimportant. Whilst the cost of the T&C does represent a significant investment for firms, technological advances have meant that more content is delivered at a keener price than ever before.
“The CISI invites the FCA to engage us in a discussion about how T&C can be delivered in a cost-effective way to a wide audience, as we strongly believe that there is nothing to gain by shrinking the knowledge pool,” Culhane added.