Whilst I have many concerns about how the financial services industry is regulated and promoted, I have no illusions about how difficult a task this is for the regulator, the FSA. I have a significant amount of sympathy for them as they attempt to separate the wheat from the chaff and prevent the two being mixed or confused by the general public.

Today the FSA announced that it is considering changing their rules in relation to UCIS (Unregulated Collective Investment Schemes). You would think that this is straight-forward enough, after all, the tell-tale feature is in the very first word of the product name. However, its a little more complex and as with most things, not every UCIS product is “bad”. The RDR changes from 2013 means that to be classified as an Independent Financial Adviser, the adviser firm has to be able to assess and arrange UCIS products. This has given many of us some concerns, as this is a highly specialised field and one that is easy to get very wrong. The FSA themselves, would not expect that UCIS is appropriate for more than 2-3% of the population.

Recent scandals, that have resulted in many firms becoming insolvent and threatening the access to professional indemnity insurance resulting in much higher costs for those that know what they are doing. This has given IFAs serious cause to consider not being independent from 2013. So today’s news is probably welcome and I await to see the detail of the Consultation Paper. It should mean that there will be fewer advisers thinking that they need to arrange the odd UCIS without doing any proper research. UCIS products can be very complex or they can be realtively simple. However, assessing them can feel more like being a business angel from Dragons Den than a financial planner. However, the FSA need to tread with care so that they do not become “product approvers” resulting in reduced innovation. However, I am more than willing to concede that in this instance, the greater good is served by preventing access to products where both investor and adviser can lose it all.

I’m not a huge fan of UCIS, partly because I receive loads of emails from promoters which have the hallmarks of disaster – offering “guaranteed returns” and “high commission”, I have my own name for them, Unique Commission Incentive Scam.

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