Neutral Debate Addendum

I attended a lively POD meeting last night, where this issue was raised as an agenda item by another IFA member. He was putting the argument for change, to allow Financial Neutrals to act as Implementer, should the client wish it.

It was a considered and well reasoned argument too, borne out of a genuine concern to do the best job possible for the clients and to address certain regulatory anomalies. I maintained my view (probably rather less eloquently) and we were called to a halt by some rather bemused looking Lawyers, as our discussions descended to more technical and regulatory depths.

I understand that this issue will be an agenda item for the up-coming POD Liaison Officers meeting, which is good. I also believe that it has been, or will be raised at the Resolution ADR committee meeting.

Some very real points of interest were raised last night and it is worth airing them I think:

If the role of the Financial Neutral is unregulated, as the FSA suggests, then the decisions reached and the agenda presented to the Financial Implementer has not been borne of a Regulated Advisory process.

If, as has been suggested, the client presents this agenda to the Financial Implementer as an ‘Insistent Customer’ or for ‘Focused Advice’, then the Implementing IFA will act accordingly, not commenting on the generic product decisions, but rather advising on the specific product and fund choice, or specific Insurance Company for protection, etc...

The perceived dilemma here is that the client has no regulatory recourse to complain about the generic product decisions that have been made as a part of the Collaborative process.

If the client insists on a full advisory service from the Implementing IFA, then that IFA will be required to analyse the objectives of the financial settlement and the generic decisions taken and might, conceivably, question them.

The second point is far simpler and less technical.

If the client or clients wish to employ the Financial Neutral as the Implementing IFA, is it right to restrict their choice to do so? If they feel that a rapport and trust has been built, how is the decision to exclude this possibility compatible with the FSA ‘Treating Customers Fairly’ regime?

As to my view, I still think that it is imperative that the Neutral role remains true to its name.

The whole point of this process is that it requires the clients to take ownership of the decisions that they make. Sometimes, the financial settlement might appear to be very unbalanced or illogical, because it is a result of a trade-off over something else (custody of the dog, the family nose flute collection). It is easy to see how somebody from outside the process might not appreciate all of this.

If the clients wish to complain about the advice that they have received from the Financial Neutral, then they have recourse to the Courts, but that will hardly fill them with confidence.

Personally, I would feel far more comfortable if the role of Financial Neutral was a Regulated activity, requiring Accreditation and special FSA permissions. However, I fear that the chances of the FSA hopping off its ‘Light Touch’ regulatory fence are pretty remote.


The beat goes on..............