Holistic IFAs are encountering problems with the FCA’s regulation of consumer credit and are no longer able to advise on basic things like paying off a credit card without requesting and paying for permission, Adam Bell has complained.
The partner at Hertfordshire-based BPH Wealth Management said that even though his firm did not charge for basic advice like paying off credit card debt, it was becoming difficult to help clients now that the regulator required special permission for this type of advice.
According to the FCA handbook, recommending a mortgage with a certain provider or suggesting a client pays off debt now came under ‘debt counselling’, which required filling out a form containing an “immense” number of questions, and paying an application fee of £600.
In addition, the regulator proposed an ongoing fee of £300 per annum, which Mr Bell called “daft and totally out of proportion”.
Even though his firm does not offer mortgage advice, he said it was natural for advisers to discuss managing debt. He added: “As part of being a holistic IFA, if we are seeing a client who has some money to invest, if they have for example a credit card debt outstanding, we would tell them to pay that off first, and then invest the balance.
“For the consumer credit regulation, we have to apply for the full permission simply to say to clients ‘pay off your credit card debt’. If we do not, then we would be acting illegally.”
Mr Bell claimed to have pointed out to the FCA his concerns during its original consultation, but other than cut fees it had taken no further action.
He was particularly frustrated with the information pack he was asked to complete by the FCA, which he said would prove off-putting to many advisers.
Despite being in business for a while, he said the forms treated his firm like a new one.
A spokesman at the FCA said: “Any firm that was licensed by the OFT, and is continuing to provide consumer credit services, needed to apply for interim permission before 1 April.
“The authorisations process is one of the key differences between the FCA and OFT regime and will help to improve standards in the sector.
“This process is deliberately more detailed than OFT licensing was but we believe it should help establish a minimum standard across the industry which is in everyone’s best interest.” .
Stephen Jones, chartered financial planner at north Wales-based 75point3, said: “It needs to be regulated as credit card debtors are usually in a vulnerable position and advisers turn them into long term debt secured against properties. In the bad old days they would add them to interest only mortgages. I have just had one. A lady came to see me on a referral from her son-in-law. She saw an adviser seven years ago, who added unsecured debt and credit cards to her mortgage to make it more affordable. When the lender asked for the money back – as she is 72 and they should have had it when she was 70 – she could not pay and had to sell her house.”
