As the festive period is upon us, I have decided to look at some of the odd effects of regulation. You know the type of thing – EU regulations stating that bananas must be straight or that sausages must be called ‘high fat animal emission tubes’. Some of these were going to happen, some may have happened. Others I’ve made up for fun.
Distance Marketing Directive The DMD came into effect in October this year. It appears to have had two implementation dates, depending on whether you’re an IFA or mortgage intermediary. In the late 1960s, Sweden changed from driving on the left hand side of the road to the right. This wasn’t a problem until the government announced a different implementation date for cars to that for buses and trucks. It banned cars from driving on a particular day to allow buses to get the hang of it – a true story. There was some initial confusion about the DMD. What, after all, was the definition of ‘distance’? It seemed to revolve around “meaningful, simultaneous physical presence”. As this is a family magazine, I won’t go into some of the examples people put forward.
NILGI This takes effect on January 14 2005 (four and half weeks away – or two working days, depending on your Christmas party schedule). Consequently, some have confused its title as ‘Not Imminently Likely to Get Implemented’ or even ‘Not In this Lifetime – Generally Ignored’. Non-Investment Life and General Insurance is its true name. If you’re unsure how it will affect your firm, AMI has a raft of support material and good practice guides now available.
Depolarisation Nothing to do with Captain Scott or global warming. This is the FSA breaking down the industry’s traditional barriers. A critical part of it, which allows IFAs to show the value they are delivering, is called the Menu. This shows an unerring rule of regulation – there is no idea so simple the regulator can’t over-engineer it. While the basic idea is sound, the execution may require a degree in FSA-ese.
Regulation is magnetic Regulation tends to be magnetic, attracting one thing, four, five, or six other previously separate parts to it along the way. Take a quick glance at the scope of the Financial Promotions if you don’t believe me, with second charges and buy-to-let now implicated.
Long live the MCCB We’ve all heard it: “I’m not moving to the FSA, I’m staying with the MCCB.” When disillusioning these people, I swiftly move to the fact that mortgage regulations categorically state that advice has to be given while standing on one leg – preferably the left. For those who remember the Peter Cook and Dudley Moore sketch, where Dud goes for the job of Tarzan and Pete is the casting director, you will remember Dud had only one leg.
Pete came out with the immortal line: “Your left leg is Tarzan-like, your left leg is fine, I have nothing against your left leg – but the problem is neither do you.” Since most mortgage brokers offer advice on mortgage and general insurance products, both legs are needed to have a successful business. Make sure you’re going to be fully compliant with GI regulation.
MIFID Not the John Wyndham novel Day of the Triffids but a far more cunning green shoot from Brussels which could adversely affect all firms that hold client money and even increase the cost of PI insurance. The Markets in Financial Instruments Directive goes to prove another long-held belief about regulation – while intermediaries aren’t usually the target, they can get caught in the cross-fire. Needless to say AMI is fighting this corner now and will be in 2005.
EU-rrrgh! With 70% of all proposals for financial services regulation emanating from Brussels, it’s vital to be able to fight the battle at that level or risk squabbling about how things get implemented, instead of if. One of the latest schemes is to harmonise mortgage advice across Europe. If we thought M-Day was bad, imagine how it would have looked if it had been rolled out across all member states. EU-rrrgh indeed!
Favourite My favourite is the directive requiring firms to offer Key Facts Illustrations in both soft and hard-back covers. I think I’ll just wait for the movie. As the industry has spent the equivalent of the GDP of several countries on KFI production, it should be better recognised. Perhaps next year will see the ‘best two-year fixed rate, with no extended redemption penalty KFI award’.
Regulation can be ridiculous, but, as with death and taxes, it’s a fact of life. In 2004, all the talk was of preparing for regulation. In 2005 we will have to live with it. The phoney war is over and AMI’s role is to help members thrive in our newly regulated world.