September 2007

Talk of the town

Day one of the upcoming Morningstar UK Investment Conference will feature an "Adviser Forum" where a panel of leading investment advisers will debate the topical issues currently influencing retail investment advice.

Two major developments - MiFID and the FSA Discussion Paper, "A Review of Retail Distribution" - are likely to be hot topics. One is imminent, and the other, though still in the discussion stage, has the potential to change the face of financial advice in the UK forever.

Few attending the Conference will be unaware of MiFID (the Markets in Financial Instruments Directive), the EU directive which is due to be implemented in the UK from November 2007. The Financial Services and Markets Act 2000 (Regulated Activities)/2001 has been amended to comply with MiFID and the FSA has taken the opportunity to replace its existing Conduct of Business Sourcebook with a new, more concise version (NEWCOB).

So, will MiFID change the way that advisers operate. The panel members are certain to hold their own views. There are many who point to the fact that the UK is the most regulated market in Europe so that, in practical terms, MiFID may simply crystallise principles and procedures that are already in place. In this context, the move away from prescriptive rules should be perceived as a triumph for common sense. Others point to the fact that the principles themselves are open to individual interpretation, which may produce inconsistencies in terms of what is deemed to be "treating customers fairly".

The second development that seems sure to attract comments and robust opinions from the panel is the recent release of the FSA's Discussion paper, "A Review of Retail Distribution" (RDR).

For those of us who have been involved in the advice industry for any length of time, this may seem like deja vu. Surely it was only yesterday that we were grappling with CP121 and coming to terms with the abolition of polarisation?

The Discussion Paper contends that the categorisation of advisers as independent, multi-tie, tied and whole-of-market advisers has led to more, not less confusion. Few would disagree. The Paper then proposes a new system of categorisation based, not on the range of products on which advice is provided but rather on the basis of remuneration and educational qualifications.

First, an adviser will only be able to use the term "independent" where remuneration has been agreed directly with the customer and completely independent of the product provider. Any adviser benefiting from provider driven remuneration will not be able to use the term independent irrespective of qualifications and/or the range of services provided

Second, at the top level, an adviser will be designated a Professional Adviser where that individual is highly qualified to provide holistic financial advice; a General Adviser will be less highly qualified but still capable of providing full advice. A Primary Adviser will be able to provide "basic advice" on "simple products" only under a "lighter" regulatory regime. The accreditation of professional, general or primary would be on an individual basis so many firms are likely to have individual advisers at different levels.

Framework for discussion

The FSA paper is at this point only a framework for discussion. The FSA has set a timeframe of six months, i.e. until the end of December for responses and comments - and, based on the initial plethora of press statements there will be plenty. Indeed, there appears to be little agreement at this point on the merits of the proposal.

The Panel session will offer a great opportunity to debate the RDR with an opinionated panel of leading IFAs. Since the Panel will also be fielding questions from the floor, delegates will have the chance to have the panellists address other issues of interest.

Morningstar Investment Conference discounts

The Morningstar Investment Conference takes place on the 19-20 September. The adviser forum will be chaired by Nick Cann, CEO of the Institute of Financial Planning. There is a special discount for Retirement Planner readers. Registering before 7 September entitles you to a discounted rate of £200 for both days with promotional code IM001 (full price £300) or £115 (full price £150) with promotional code IM002 for one day only. For more information and to register, please visit www.global.morningstar.com/conference/adv

Bob Freeman
Senior Product Manager - Adviser Products
Morningstar