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Regulatory reform risks failure, says AIFA

As the anguished debate over RDR heats up, the Association of Independent Financial Advisers (AIFA) has published what it calls a ‘Manifesto for Regulation’ which sets out six high-level principles that it believes ought to apply to the governance of regulation. The report is implicitly critical of the FSA’s determination to tighten up on certain areas of IFA activity, and it threatens that, unless the industry can settle on a more cost-effective level of regulation and also to avoid the constant chopping and changing of rules that characterises today’s environment, the RDR project may turn out to be a failure.

The report, produced by AIFA and its Council, has been submitted to both HM Treasury and the Treasury Select Committee as part of their respective reviews of the proposed regulatory architecture. But it is also encouraging AIFA members to use the report as a tool for engaging directly with MPs on regulatory reform and the issues affecting the advice profession.

AIFA’s six principles for regulation are that it must:

  • Enable better outcomes for more consumers
  • Have the appropriate checks and balances in place to ensure accountability
  • Work in a proportionate and risk-based way
  • Changes less, with fewer “new ideas” and more consistency of delivery
  • Be cost effective
  • Take into account the European dynamic

“Regulation is essential for good consumer outcomes,” Director of Policy Andrew Strange, said on 16th November. “But constant regulatory flux deters financial investment in firms and weakens consumer trust in the sector….Regulation must be cost effective and focused on those that pose the greatest risk, and it must include robust external accountability mechanisms.

“Judging the current Retail Distribution Review by these six principles there is a real danger it will be seen as a failure…While we support the original objectives there is a serious risk of driving out good firms, increasing the costs of advice, and reducing access to the financial services market for UK citizens.

“The new regulator needs to address the wider public policy agenda in order to help consumers re-engage with their long term financial well-being and making more, and better, provision for themselves…It must act in a way to increase access to advice not reduce it. And the success or failure of regulation in the future needs to be measured against these standards. “

The full report is available at

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