Dear Members,

As the year draws to a close, I would like to take the opportunity to brief you on our activities this year, and to give you an outline of the work we will be doing in 2012.

It has been an extraordinarily busy year for AIFA, and we have been able to achieve a great deal to influence the shape of the regulatory environment, and to hold regulatory entities to account on issues that impact upon the vitality and sustainability of the advisory sector.

I would highlight the following accomplishments in particular:

• Our work on RDR at a time of division and turmoil in our community led us to a hard won consensus position which was reflected to a large extent in the conclusions that were reached by the Treasury Select Committee.
• We have seen a delay announced on capital adequacy requirements, after persistent lobbying by AIFA and others. This will provide much needed breathing space for many small and medium-sized firms.
• AIFA responded to the Keydata interim levy by a careful picking apart of the basis for the levy calculation such that the regulator accepted that it did not comply with their rules. As a result the FSA  conceded the opportunity for firms to re-submit their tariff data
• Our lobbying and robust public response to the Consumer Focus attack on renewal and trail commissions was sufficient to ensure that their report did not gain traction
• Our work on the new regulatory architecture has been based on our very clear Manifesto for Regulation, and we gained an opportunity recently to appear before the Joint Committee on the Financial Services Bill to make the case against spiralling costs for small firms, and to press for a liability long-stop on the basis of consumer benefit
  

Beyond the core policy work, AIFA has been very active in its efforts to forge a better future for our members with our services and thought leadership activity.

Our FFWD Business Transition Academy has provided an invaluable resource to member firms who are grasping the nettle of transforming their businesses to thrive following the RDR, whilst our Diploma in Investment Planning has proved very popular in helping experienced advisers to achieve a Level 4 qualification with an exam based on case studies.

Our work on Platform Due Diligence, and Financial Planning Through Retirement have also been well-publicised.

But there is much more for us to do in the coming year.

We have continuing challenges for our membership in the detail of RDR as the deadline approaches, and the reshaping of regulatory architecture presents an opportunity to press for greater accountability from the new regulator.

And in Europe the progress of MiFID and other directives in development will need close attention if the interests of the UK community are to be best served.

We are also working with FOS with a view to achieving a fairer deal for IFAs, and as you will have seen recently we are challenging the FSCS on their handling of the Keydata recoveries.

Whilst the market is in transition, so is our Association. We have recognised that we must adapt to changing circumstances, so we will continue our work to build the future for a small Association which has punched well above its weight.

You can hear more about our work from my speech at this year's AIFA Annual Dinner which has been recently posted online.

Thank you for your support in 2011, have a Happy Christmas and a Prosperous New Year.

Best Regards
Steve

I have been asked to speak later this month on the progress of the Retail Distribution Review, and have been asked to address the question of whether it is too late to 'avoid the RDR meteor'.

A short speech that will be, you might think, but there are lessons in the metaphor. Scientists have speculated that an apocalyptic meteor impact could be avoided if it were given a small nudge far enough in advance.

And that is the case with regulatory change too. If we want to influence outcomes for our members, it is all about timing. Getting to an issue far enough in advance, with a constructive perspective is much more likely to be productive than to argue against the prevailing agenda when the decision has already been taken.

The policy agenda over the last month has been dominated by the pre-legislative scrutiny process of the Financial Services and Markets Bill which will soon be making its way through Parliament. Many in our community will not have had this on their radar screens, but the issues we face in the future will be affected to a great degree on how the new regulatory framework operates, and that depends on the way the Financial Services Bill is drafted. So it is really important.

AIFA responded to the call for evidence on the Bill, and appeared before the Joint Committee in Parliament on 20 October.

There were two key issues that we were able to press during the hearing; the first was the impact of the layering of regulatory costs on small advisory businesses, and the second was the need for a fifteen year longstop. It is worth noting that whilst the arguments on these issues are many and various, it is crucial in the public arena to put forward the case on the basis of its benefit for consumers, rather than appearing to plead the special interests of our community.

Having the opportunity to make this case doesn't come cheaply or easily though.

It requires many days of preparation - analysing the draft Bill, developing positions that will stand up to scrutiny, preparing for the breadth of subject matter that can arise in committee hearings, and developing a congruent media position. These are the things that have to be done if we are to be taken seriously, and they are funded by our member contributions.

Some may ask of the longstop issue "why haven't they shouted about it before?".

Well, the answer to that is that whilst we have consistently been making the case, there is a time and a place to push if we want to optimise the chance of success.

The political process and the new Bill has brought us an opportunity that wasn't there before, and we had laid the ground so that we could press the case when the right chance arose. We know that the professional soldier prepares carefully and waits until the target presents itself before squeezing the trigger. And we know what we think of the militia who ride around in pick-up trucks firing their rifles in the air.

In all policy matters AIFA continually seeks to develop the right policies, and to deploy each with the right approach.

Whether we are talking about the strategic sweep of policy development, or specific issues of regulation, getting the timing right is the crucial judgment to be made.

Read the newsflash on the evidence given to the JSC

Since 2009 AIFA, in association with Prudential, has undertaken annual research reviewing the decumulation landscape. This focused study looks at the practical aspects of decumulation advice and guidance to consumers.

The research, carried out by NMG, is very interesting and reflects much of what we have been told by our members. Key findings include:

• The less wealthy are heavily dependent on cash based savings yet there is a clear gap in knowledge about how to optimise income from these, compared to those with over £25k.
• There are clear barriers for those with under £25k in terms of getting access to relevant financial advice and information, although there is a need for it; some say they do not need advice, but this is likely to be driven by awareness of what is available.
• There are signs of increased recognition among IFAs that they need to be more selective around the service they are willing to offer their at retirement clients, particularly those with smaller pension funds.
  

The research was then debated at length in a steering group made up of NMG, AIFA, Prudential and a number of representatives from our member firms - encompassing small, medium and large enterprises so that we could have a comprehensive view. The next step was a public policy debate, which was very timely ahead of the Party Conference season!

IFA and Prudential hosted a lunch last week with attendees from the APPG Insurance & Financial Services, ABI, Age UK, Carers UK, NEST, FSA and the Financial Services Consumer Panel, amongst many other contributors.

As expected, there was a lively debate about the importance of advice at retirement and the impact that RDR and other regulatory initiatives will have on the availability of cost effective retirement advice post-RDR.

It was also noted that with the new reduced annual allowance limit it is not just the low-medium earners who will need good advice but those HNW clients who would utilise their total allowance annually.

It was overwhelmingly agreed that the industry needs to find a way to combat consumers inertia when dealing with their retirement planning and change the way in which consumers engage with their financial planning.

Ideas for a pragmatic method in which this can be achieved, however, differed between attendees!

As a Policy Analyst it is very exciting to be able to contribute to a project like this and seeing how the benchmark research has changed over the last two years provides an important factor to be considered.

The feedback from attendees provides vital insight not just in the drafting of the report, but also in forming AIFA's lobbying strategy in the months ahead.