Life Insurance, AML, and the rest
Captain Timothy Stackpole - 9/11 Memorial

Advisers "Hiding" in QFEs

The idea that an adviser could 'hide' in a QFE is about as unlikely as an adviser being able to hide today in a limited company structure. QFE could possibly the best thing that the Financial Advisers Act contains, allow me to illustrate:

One of the great advances in western economic development came with the creation of joint stock companies - this allows incredible flexibility to be introduced to business. Otherwise ventures were nearly always owner-managers. The business being essentially the occupation of a person, or sometimes a partnership, or occasionally a family. These would be complemented by hired hands of one descrpition or another. The ability to have non-expert investors represented by directors allows good ideas to join with capital and better, bigger, buisnesses can be formed, and formed faster.

The focus on individual advisers being the compliant core of an adviser business pushed the balance much further back towards the business being dependent on a person. QFE is the mechanism which allows larger financial adviser businesses to be formed. The flexibility will no doubt be good for the market.

It is absolutely true that individuals will not be able to 'hide' in them. There has always been a level of combined individual and company responsibility in every larger business you come across: if someone in a car dealership cheats, or otherwise breaks the law then you better believe they are individually responsible - AND the company is responsible. This is a fine situation.

The flexibility is increased, personal responsibility is complemented by corporate responsibility - which usually adds deeper capacity to the ability to remedy harm, and we all win.

But QFE has more, because it is the entity which qualifies it is not so hopelessly dependent on individual advisers - although this depends on the precise mix of the products that they sell.

I think it's just a shame that such a good idea - if it works out the way it looks like it will - was not thought of earlier in the process and given greater definition in the legislation rather than being a creature mainly of the regulations.

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