Keeping calm in a climate of fear

As most of you will know by now, John Tiner has announced that the Financial Services Authority will be undertaking a "more detailed exploration of the issues" surrounding commission disclosure, which will come as no surprise.

Reading Tiner's speech - and I counsel you all to do so - he sets out various reasons why the FSA believes such a review is needed. An unlevel playing field between those that do disclose and those that do not is one. This is enough to make most broker's blood boil. Those who do disclose are, in the main, those that fell foul of New York attorney general Eliot Spitzer. If they feel it is an unlevel playing field why do they not stop disclosing, allow the client to ask if they wish, and manage conflicts. Everyone else does.

Another point Tiner raised was one of consumer protection which I am at a complete loss with. My company has a section in our terms of business agreement wording, as championed by the British Insurance Broker's Association, that, if a client wishes to know the commission my company earns, then they can ask. Out of roughly 25,000 clients, my company had two requests last year. Tiner expresses some bemusement at this lack of consumer concern - why don't they ask? The fact is they do not want to know.

Is it not also the ultimate irony that at a time when the FSA are reviewing whether they have "gold-plated" regulation they head straight into the most sensitive and complex issue of all? Nowhere, as I understand it, is mandatory commission disclosure required in the Mediation Directive that spawned FSA involvement in our industry.

At least what is proposed will hopefully put to bed this issue once and for all but do not underestimate the effect that even opening these discussions will have. You cannot review the basis upon which a broker earns their income without generating a climate of fear and concern and, therefore, driving further consolidation in a market that is already consolidating at a faster pace than many of us have ever seen.

To be fair, the main problem the FSA have is that they rule over such a wide ranging industry and one size simply does not fit all. I fear that the inevitable conclusion may be that we end up as the independent financial adviser world has, with very big brokers and very small brokers and nothing in-between - what a shame for the industry and more importantly what a shame for the client.