Question
I have had the same IFA, a one-man band, for the last 10 years who works via a larger IFA company for reasons of compliance, etc. Over the years I have been pleased with the advice given
As a consequence of RDR the owner of the large company has purchased a S Irish IFA Company which has a Dublin office as well as a local office here. My IFA tells me that the Central Bank of Ireland will now become their regulator with very much reduced bureaucracy compared to the FSA and there is not a need for IFA's to have a Level 4 qualification. The result being that fees have not increased since RDR.
Apparently several British IFA's are seeking regulation via the Central Bank of Ireland for the reasons given above.
The bottom line: where does this leave me if I need the services/advice from the regulator? Does the central Bank of Ireland have any 'clout' here or would they work in conjunction with the FSA in the event of problems?Answer
To answer your question, in the event of any problems your dealings would be with the Irish regulator, not the FSA. This also means you won't benefit from the protection potentially afforded by the UK Financial Services Compensation Scheme (FSCS) and Financial Ombudsman Service (FOS) in respect to the advice given, although the Irish regulator might have equivalents (it's not something I've looked into).
In my opinion there's significantly more potential downside than upside to using an IFA operating in this way.
What your IFA appears to be doing is using the EU 'passporting' system to provide financial services from one EU state into another. While this can be a very sound system in the right context - for example it means a UK adviser could give Spanish expats FSA authorised advice with the protection that brings - your IFA is using it more as a loophole to try and make their lives easier by avoiding FSA regulation.
One fundamental issue is whether your IFA continues to have a UK office or advisers permanently based in the UK. If they do then my understanding is that they must adhere to the FSA's (Conduct of Business) rules in any case, so I can't see what benefit they'd get out of passporting in from Ireland.
Another is what services they gain authorisation to passport. In general they can apply under MiFID (Markets in Financial Instruments Directive) which broadly covers investments and/or IMD (Insurance Mediation Directive) which broadly covers insurance based products. If the IFA doesn't have both they'd arguably be restricted as to what they could advise on hence less than independent.
Personally I wouldn't deal with a financial adviser trying to use this loophole. Aside from the potential complications mentioned above, if they had any integrity they simply wouldn't bother doing this. Attaining Level 4 qualifications (at worst a mix of multiple choice and short written tests) is not exactly difficult for a competent adviser, so I'm very wary of any advisers looking to duck this rule.
And while it's true the FSA seems to have little grasp on cost and is hardly a pleasure to deal with, it's still possible to run a profitable IFA charging fair fees under the new FSA regime. Advisers just need to work smartly, efficiently and avoid being greedy.
I have had the same IFA, a one-man band, for the last 10 years who works via a larger IFA company for reasons of compliance, etc. Over the years I have been pleased with the advice given
As a consequence of RDR the owner of the large company has purchased a S Irish IFA Company which has a Dublin office as well as a local office here. My IFA tells me that the Central Bank of Ireland will now become their regulator with very much reduced bureaucracy compared to the FSA and there is not a need for IFA's to have a Level 4 qualification. The result being that fees have not increased since RDR.
Apparently several British IFA's are seeking regulation via the Central Bank of Ireland for the reasons given above.
The bottom line: where does this leave me if I need the services/advice from the regulator? Does the central Bank of Ireland have any 'clout' here or would they work in conjunction with the FSA in the event of problems?Answer
To answer your question, in the event of any problems your dealings would be with the Irish regulator, not the FSA. This also means you won't benefit from the protection potentially afforded by the UK Financial Services Compensation Scheme (FSCS) and Financial Ombudsman Service (FOS) in respect to the advice given, although the Irish regulator might have equivalents (it's not something I've looked into).
In my opinion there's significantly more potential downside than upside to using an IFA operating in this way.
What your IFA appears to be doing is using the EU 'passporting' system to provide financial services from one EU state into another. While this can be a very sound system in the right context - for example it means a UK adviser could give Spanish expats FSA authorised advice with the protection that brings - your IFA is using it more as a loophole to try and make their lives easier by avoiding FSA regulation.
One fundamental issue is whether your IFA continues to have a UK office or advisers permanently based in the UK. If they do then my understanding is that they must adhere to the FSA's (Conduct of Business) rules in any case, so I can't see what benefit they'd get out of passporting in from Ireland.
Another is what services they gain authorisation to passport. In general they can apply under MiFID (Markets in Financial Instruments Directive) which broadly covers investments and/or IMD (Insurance Mediation Directive) which broadly covers insurance based products. If the IFA doesn't have both they'd arguably be restricted as to what they could advise on hence less than independent.
Personally I wouldn't deal with a financial adviser trying to use this loophole. Aside from the potential complications mentioned above, if they had any integrity they simply wouldn't bother doing this. Attaining Level 4 qualifications (at worst a mix of multiple choice and short written tests) is not exactly difficult for a competent adviser, so I'm very wary of any advisers looking to duck this rule.
And while it's true the FSA seems to have little grasp on cost and is hardly a pleasure to deal with, it's still possible to run a profitable IFA charging fair fees under the new FSA regime. Advisers just need to work smartly, efficiently and avoid being greedy.
Read this Q and A at http://www.candidmoney.com/askjustin/828/am-i-fsa-protected-if-my-ifa-moves-to-ireland
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