Now that was a paper and a half. PS11/9 will, I think, in time be seen as a watermark in terms of what FSA have to say about those who try to screw with them. In fact, if you enter a secret code when you download the paper, there’s an extra page at the back which says, We would like to consult with the industry on how it likes them apples. Apples. APPLES. HOW DO YOU LIKE THEM APPLES!
I read PS11/9 as a flexing of muscle and a statement of intent as much as one of policy. Their view of what the retail investment industry has to do is about consumer detriment (or their view of it) and nothing else. All the rhetoric, all the lobbying, all the trolls on Citywire and elsewhere have achieved very little. It’s bounced off them and stuck to us.
No point summarising the report here, you can get that anywhere, but here’s a few things that stood out to me.
The cash rebate ban has clearly irked FSA. They say themselves that 75% of responses were negative, and then go on to say that, We have carefully considered these objections! and we do not feel that any of these should prevent us from proceeding with a ban. Or to put it another way, stop coming at us with self-interest. We are not convinced that the industry is as evolved as you say it is.
This ban is irritating and unnecessary. But the reanimating of the ban on payments to platforms is dynamite. 1 August will not have been a good day for those platforms whose revenue streams depend on retaining rebates and shelf space fees. Again, some muscle flexing. FSA have had sand kicked in their face on this issue, and this is them hitting back.
Talking of hitting, spare a thought for poor old Peter Hargreaves who popped up in the press today saying that the payment ban won’t affect HL’s business. The market was not convinced and delivered a Johnny Marbles-style cream pie to the HL fizzog with a 12.7% drop in a day.Some more convincing required, Mr H, and perhaps a new PR agency.
At least HL make money. What about a huge bundled player like Skandia, or even CoFunds? The former is still loss-making and taking cash injections, the latter is profitable now but has needed huge scale to get there. What happens when a (presumably major) hole is punched in their revenue stream? The unbundled market is highly transparent and price-sensitive. Are the margins there? Price is coming front, centre and down. What impact will this have?
Also, now that the end 2012 dateline is busted, what price that FSA take the opportunity to pop another few items into the shopping bag that were staying on the shelf? I see the legacy assets issue is raising its head again with a 2-month consultation. Do I sense some more muscle flexing coming on? If existing business is disturbed by new rules, the impact on the provider and adviser community will be so profound that the rest of the changes required will look like a school project.
In the relentless parsing of the RDR, it’s easy for us to forget just how broken FSA, and of course many consumer groups, believe the retail financial services investment industry is. And in general RDR is good, if flawed in parts, from a consumer point of view. You also have to praise FSA for conducting a really comprehensive consultation. We have had a chance to engage and if we did not take that chance we cannot complain. But from now on in, the dialogue is how we build it, not whether it’s a good idea. And all the fulminating in the world won’t make a difference. FSA has reminded us in PS11/9 who is really in charge, whether we like it or not.
It’s time to get to work.