Happy New Year to you all !

2011 has been a bad year – I am not sure 2012 is not going to be worse...

To start with a note of optimism, let us meditate the words of Chesterton:

“The whole modern world has divided itself into Conservatives and Progressives. The business of Progressives is to go on making mistakes. The business of the Conservatives is to prevent the mistakes from being corrected”

In 2012 we shall need to focus on few key issues: MiFID II/MiFIR, PRIP’s and IMD II.

Mr.  Barnier has managed to succeed with his project of new MiFID to kill the independent asset managers. His aim to leave the floor to the large financial conglomerates, free to sell whatever toxic product they may still have to sell to millions of naive European consumers has been achieved if the European Parliament does not amend his draft Directive.

I fail to understand why Mr. Barnier keeps talking about encouraging (or just preserving) SME’s to develop when in the meantime his legislation drives them to bankruptcy!

Jobs killer, in the name of consumer protection, the European Commission grants all the power to ESMA, an agency of arrogant and incompetent Ayatollahs, far from any sort of democratic control as required by the European Parliament.

Today, Europe is not just a joke: lead by corrupted politicians (since the Borgia era no real progress has been made: watch the news in Germany, Italy, France or the UK...), run by arrogant and incompetent bureaucrats, the EU has developed a Soviet-type bureaucracy and slowly became a police state, but willing to teach the world a lesson of Democracy...

From the speed camera on the motorway to finance the state deficit to the end of any kind of client data protection in order to fight tax avoidance, the Eurocrats are paving the way for the populist vote everywhere in Europe.

To conclude with another optimistic touch: the EU represents only 19% of the world GDP when the BRICS represent 67%...

Enjoy the first weeks of 2012 !

Vincent J.Derudder
Chairman

Gold Plating

This is a term that has become familiar to many members of the Financial Services sector in the United Kingdom.

It refers to the practice of ‘gilding the lily’ or making more out of the surface facts to give the appearance that they are providing a more superior product or service than they really are.

It was way back in 2000 at the European Summit in Lisbon that the EU governments pledged themselves to an agenda of deregulation. As a consequence of this the European Commission has supported more maximum harmonization measures and these effectively prohibit gold-plating.

It is often argued by the business lobby in the United Kingdom that the government and the various agencies such as the FSA put additional measures in place on the back of European directives. The problem of doing this can lead to the UK business being placed at a disadvantage to its European neighbours. Freedom of movement of services and freedom of movement of labour are areas where Gold plating can have a serious detrimental impact.

Much of the recent EU law has been based on minimum harmonization which allows more member states to conform more easily to the requirements.

Kevin Mudd
Treasurer

L’ECONOMIA DELLA FELICITA’

Sembrerà strano a tutti, soprattutto in questi periodi di crisi, ma vi è una stretta correlazione tra la felicità di un paese e lo sviluppo economico del paese stesso.

Secondo gli studi di Eric Maskin americano, premio Nobel in economia nell’anno 2007, un reddito elevato  non basta per essere felici.
La somma quindi di tanti cittadini con reddito elevato non è sufficiente per creare una felicità sociale che sia perdurante nel tempo.

Il vivere bene

Vi sono infatti elementi positivi, quali le bellezze naturali, l’arte, la musica, il buon cibo ed il buon vino, che influenzano la nostra vita.

Fondamentale nello studio di Maskin è anche la qualità delle relazioni sociali, che aiuta a raggiungere la felicità.
Tutto questo porta una serenità di fondo e conseguentemente una visione positiva del futuro che crea maggior produzione, maggiori consumi, e dunque a maggior benessere.
È una sorta di avviamento, è un vero e proprio goodwill, che riqualifica le priorità strategiche di un governo.

Le conclusioni di buon senso

Il principale errore secondo Maskin è il non considerare questi i veri driver della felicità nell’analisi dello sviluppo di un paese.
L’infelicità di contro, ha i suoi costi che si ripercuotono sulla crescita dell’individuo e sulla crescita di un paese.
Il rischio? Un minor rendimento nel campo professionale, più competitività negativa, il che porta ad una minor crescita in termini economici. Ogni nazione dovrà strategicamente puntare ad avere il giusto balance tra crescita economica tradizionale, grado di sicurezza del cittadino, educazione sociale della popolazione, difesa dell’ambiente.
Le proteste degli indignados nel mondo contro le banche, il consumismo e in generale le istituzioni possono essere una grande occasione per i paesi occidentali nel mettersi in discussione per una società più equilibrata e forse, in futuro più felice.

Monty Python´s for President?

Do you remember Monty Python's Flying Circus? It was the name for the English comedy troupe on BBC from 1969 through 1973. Their show offered savage broadsides against the pomposity and repression of the British establishment. It occurred to me while reading the fifteenth RDR report by the House of Commons. The FSA’s Retail Distribution Review (RDR) is the oncoming reform of the regulation of retail investment advice in UK and is due to come into force on 1 January 2013. It will remove commission paid to advisers and replace it with Consumer Agreed Remuneration.

The report has it all. First, you read a well-balanced inquiry of opinions of all stakeholders including constructive and adverse criticism. Second, you wonder about the more or less subtle comments showing the typical UK mentality to have their heads in the clouds towards continental Europe. Third, you read over the usual and studiously vague conclusions to calm the public. And fourth, you realize that the FSA / FCA will get through with whatever they want.

Just for clarification: RDR will be the end for a major part of independent financial advisers in UK as most customers are not willing to pay fees for their service. Major insurance companies and funds domiciled in UK already shift weight of their business to continental Europe. The sales of pension plans are estimated to decline. And the bill in 20 years or so will - once again – be paid by UK tax payers through zooming social insuring contributions.

You ask why this reminds me of Monty Python´s? Because some politicians in UK in all seriousness believe that RDR should become a role model for all member states of the European Union.

FECIF has held its Annual General Meeting in Prague on June 29.
Superbly organised by our associated member HSBC – the General Meeting was a friendly occasion for the representatives of the 23 national trade associations and of the 15 commercial groupings from the 13 countries members of FECIF to trade ideas and to discuss future plans.

A new Board was elected (see here) – and I would like to announce already that I do not intend to stand again for re-election after this term of three years as Chairman of FECIF. I have been serving the federation for 12 years now.

Two new members were elected to the new Board: David Charlet, Chairman of ANACOFI (the largest French trade association - http://anacofi.asso.fr) and Michael Lodhi, Chairman of FEIFA (the association of cross-border networks - www.feifa.eu).

Our General Meeting was also the occasion to welcome the incorporation recently of the "Österreichischer Verband der Finanz- und Versicherungs Professionisten" (Austrian Financial and Insurance Professionals Association) headed by our new Deputy Chairman Johannes Muschik.

The new Austrian association has 19 corporate members representing approximately 5.000 individual intermediaries.

We also welcome a delegation of Russian intermediaries. Russia was for centuries an important actor of European history – why not establishing links with our colleagues from outside the European Union? We may have something to learn from them...

The day before, I had the opportunity with Alan Morgan-Moodie, CEO of AILO (the association of international life insurance companies - www.ailo.org) to address at the Czech National Bank an audience of local regulators and financial services practitioners about the latest developments regarding EU legislation.

This was following the three meetings we held with the officials of the EU Commission about MiFID, PRIPs and IMD in April/May 2011.

Generally speaking, the Commission is more favourable (download the PPT “IFA Regulation in EU” by Vincent Derudder, from the IFA workshop in Prague july 2011) to most of our positions than the national regulators, so globally we support the view in order to fight “gold platting”, minimum harmonisation and arrogant nationalism

1. Legislation thru “regulation” better than legislation thru “directive”
2. An application of the 28th regime option wherever possible

We need to avoid that Europe becomes a bureaucratic dictatorship under the rule of the would-be EU “mukhabarat”. Clearly the national regulators have revealed what was their so far hidden agenda: to suppress financial intermediaries for the sole benefit of the big groups and their armies of salaried employees...

No one single representative of the financial intermediaries was appointed to the so-called stakeholders’ groups of the three super agencies created by the European Commission.

The bureaucratic oligarchy managing the financial services industry has succeeded to prevent a dialogue between the actors: a mockery of democracy...

The financial crisis including the latest development in Greece (Ireland, Portugal, Spain, Belgium and France to follow...) has shown than the big boys so easily supported by the national regulators have no concern nor respect for the consumer.

FECIF will continue to stand on behalf of our clients for the survival of our small enterprises dedicated to quality of service and innovation when possible.

Back to my desk after a wonderful holiday in India and many projects for the weeks to come!

We have two meetings scheduled with the European Commission – my colleagues Martin Klein, Johannes Muschik and Alberto Romagosa will join me for these two important opportunities for us to get our message across.

In June, we will hold our General Meeting in Prague, with the election of a new Board of Directors.

Our General Meeting will be organised jointly with a European intermediaries seminar sponsored by HSBC Assurance, one of our associated member.

Sadly, in spite of several promises made to the European Parliament, the ayatollahs (the national regulators) have selected the members of their stakeholders groups made up of a gathering of “yes-man”. This obsession of the national civil servants for the politically correct and for the “big is beautiful” make this exceptional initiative of the European Commission and of the European Parliament a mockery of democracy!

There will be no one single true representative of the 600,000 European intermediaries appointed to the three stakeholders groups...

Europe is an oligarchy – there is no dialogue between the actors of our economy, no wonder why the populist vote is on the raise and the anti-European feeling growing! The level of tension (caused by an over bureaucratic set of useless rules) between the actors of the industry is getting to a point which is unbearable.

To show to what extend Europe is swimming in the wrong direction: nobody in the universe believes anymore in rating or in market value – and Solvency II is based on rating and market value...

It is so obvious that the EU under the alliance of the social democrat ideology and the large conglomerates wants to kill the small players when at the same time the European Commission pretends to defend the positive role of the SME’s in the development of our economy.

The ayatollahs still believe exclusively in “big is beautiful” – the too famous “too big to fail” and they are the ones having the final say in the conversation between Brussels and the 27 Member States.

One good news in an ocean of sadness – the CBFA (the Belgian regulator) is dead and the prerogative transferred to the Central Bank of Belgium.

Hopefully the FSA will become next on the list. It is just about time prudential supervision is entrusted to competent people and no more to an association of Torquemada!

I am writing to you from India where I am on holiday, a world away from Europe and the daily difficulties of our financial services industry.

I would like to share with you some thoughts I have as a European citizen, about what we like to believe are our achievements.

I will not talk to you about India’s 3,000 years of history, its grandiose culture, the extreme poverty that plagues a large part of its population, religious violence, etc. – BBC & CNN do that all too well.

What strikes me more is the other side of India that we read about in the European Press, about yet another European business bought out by Indian interests, or the launch of some new technology development by Indian industry.

Our politicians are very quick to name a host of reasons, in an attempt to justify why Europe is lagging behind, whether it is unscrupulous globalisation, child labour, or the lack of environmental protection.

Nonetheless it is a hard fact of life: India will remain for years to come a developing country with a two-digit growth rate, just because there is so much to do here!

India is number one when it comes to global project finance ($ 82bn), far ahead of the US ($ 33bn) or even China ($ 10bn).

In India, of course, it is out of the question to claim a 35hr working week or a retirement age of 60, as the French so militantly do...

Here you can easily find 1 hard worker doing the job we would assign to 10 people; working long hours, driven by the motivation to build something for their children, something we in Europe long ago lost.
One may ask: what of corruption? What of the lack of social protection? Or the lack of consumer protection?

Corruption? Ask the UK taxpayers how they feel about the way MPs use taxpayers’ money to maintain their exuberant life-style – ask Italians how they feel about Mr. Berlusconi’s sex-life or how the French feel about their politicians...

Social protection? The highest rate of unemployment is Europe’s own personal privilege, because the same product costs ten times the price to manufacture in Europe than it does in India.
Consumer protection? What about the Dioxide scandal in Germany?

Are we afraid of India (or China) in Europe? Of course we are, because we pay more taxes and have more regulation than anywhere else in the world, which causes our economy to be more fragile than ever.

Surely a clever way to overcome this problem would be to send the European Commission to advise the Indian government on how to implement the most useless regulation: it would not take long for the Indian economy to go bankrupt!

Back to our selfish issues: FECIF will participate in the three consultations launched by the European Commission (MiFID, IMD and PRIPs).

We will see if any of our points are taken into account.

More importantly, we will also see if the stakeholder groups created to advise the three new supervisory authorities are composed of people truly representative of the industry and the consumers, or if those three groups are just another mockery composed of puppets. It is good to speak about democracy, to give lessons to others (who do not ask for it)… But to respect the basic principles of democracy at home – well that is just a little more difficult...

Going through the three consultation papers one may see many references to transparency. A lot is required from intermediaries but we will soon see that transparency has its limits: politicians do not like transparency (just look at the WikiLeaks saga) so we should not bother too much about potential risks to our profession: it is probably another “do as I say, not as I do”!

Overregulation will increasingly lead to more populist voting in Europe, at a time when most intermediaries spend more than 50% of their time not in providing a better service to consumers, but complying with useless administrative tasks.

FECIF conducted a survey which gives us great insight into the true state of our profession: intermediaries work long hours, rarely become very rich, and spend more time working to satisfy government fantasies than their clients’ needs.

What about that, Mr. Barnier?

Let’s hope that 2011 will bring better good news than 2010!

FECIF will fight harder than never in favour of co-regulation and the three consultations launched by the European Commission on PRIP’s new project legislation, Insurance Mediation and MiFID is an opportunity not to miss!

Co-regulation will give the industry a chance to ensure consumers are receiving the best quality advice and service in their best interests.

This is the interest of the clients, and in the interest of the intermediaries as in the long-run clients will naturally return to them for repeat business.

Consumers are increasingly wary and informed that the majority of commission in financial services business is made at the front-end meaning once they have signed the papers there is little in the way of recourse should they decide to change strategy.

We have offered to the other representatives of the industry to improve industry standards and the joint declaration signed with AILO (Association of International Life Offices) with the support of the consumers associations is an encouraging sign for the future.

This is the only chance we have to avoid the emergence of a world over regulated, kingdom of red tape and other bureaucratic delirium with the likelihood of killing the intermediation industry as a whole.

We can count on bureaucrats to have a more Intrusive approach in our life and the life of our clients. So, we should encourage Europe to go for more responsible-type of legislation.

We must also warn our clients not to engage into any kind of private conversation with their intermediaries on the phone as regulator are to listen in on telephone conversation, etc. – the excuse being to fight insider trading or money laundering!

European clients will be shortly asked to provide personal data about their private life in the name of the Market Abuse Directive or the Anti-Money Laundering Directive, data for which nobody is in a position to guarantee safe keeping and/or the protection against misuse by civil servants and or financial institutions employees.

Nobody denies the need to fight market abuse or Islamic terrorism.

However European citizen have a right to say no to all sort of intrusive practices of the bureaucrats.

Privacy is a right. Otherwise, what would come next?

The main focus today for our dear and expensive politicians is finding ways to pay off their debts and leave with fat payouts and as many benefits as they can sink their claws into.

Bankers are constantly being told to become ‘reasonable’, but also to continue financing the bad management of our governments. Perhaps it is time the industry gets its act together and starts playing as a team. The global financial crisis has already caused the financial services sector a loss of 600,000 jobs across the continent - but the industry also continues to pay the salaries of 142,000 regulators; should we wait until there are more regulators than financial services providers?

But before we bask in the glow of the FSA now bowing to a master of its own, we should be wary of the European Union’s track record. Nothing they do works. Not only is the EU institutionally statist and prescriptive, but their organization is inherently shambolic and corrupt. I would put it to the new Commissioner-designate Mr. Barnier, the man ultimately responsible for the regulation of financial services, that prescriptive amateur regulation of an industry so entrepreneurial, fast moving and creative will achieve nothing more than to drive it to a more flexible and sympathetic regime.

We fear the European Commission is now holding a regulatory shotgun right at the heart of Europe’s foremost golden goose; let us all hope they think twice before they pull the trigger.

Currently , we have already destroyed half the forests in the world to master this financial crisis. Waste of paper or not, the list of recommendations is impressive. How odd that only now the governments and/or politicians realize that the financial system couldn’t continue to function as before.
The new wisdom comes from all over the world, G20, The Larosière, Lamfalussy, ECB, etc ...

All these reports show that the awareness is very large, it is clear that our bankers are no innocent victims of an American crisis, but that they obviously took too many risks.

We therefore advocate a more efficient regulation of the banks instead of organising an overregulation of the financial advisers and intermediaries , because they were not to blame!

The quality of supervision has grossly failed, but also the banks simply ignored the recommendations and warnings . Therefore it is necessary to ensure that these are enforceable. Or how a credible referee can only function if he can draw cards!

So in order to make our work even more effective in lobbying the European institutions , FECIF has optimized its organization and structure in a professional manner ,  so that we can actively participate in the discussions of the various European consultations concerning the regulation which affects directly the independent distribution.

Our common goal is obviously the promotion and defence of the role of financial advisers and intermediaries in Europe. However we also support the improvement of investor protection by actively contributing to develop a unified and effective European regulation in order to defend and protect the investors, consumers and intermediaries.

Daniel Nicolaes
Former Secretary General

July, 2010

This week, we will hold our FECIF annual General Meeting in Madrid.
Needless to repeat that our message to the European Commission is that it would be good to listen sometimes to the voice of the ordinary people!

ver-regulation was I suppose inevitable.  The crisis is a convenient excuse to try to implement more rules to justify that the old ones did not work.  It is also very difficult not to succumb to a certain general feeling for more security from the general public.
But should we end up in to a situation where the industry has to comply with a mountain of box ticking regulation from Brussels?

What makes us feel uncomfortable is the incompetence and arrogance of the failed regulators without a master to tell them where common sense lies...
Nothing they do work.  Financial regulation is inherently chaotic and corrupt.  Worse it is institutionally statist and prescriptive.

Over-regulation of an industry which is entrepreneurial, fast moving and creative will simply drive it in to the hands of the gang which already controls governments through the financing of their large deficit: the large financial conglomerates...

Punishing people who point out problems is easier than addressing the causes. It is probably why the European Commission is working today on a very heavy program of new regulations.

It is part of the strategic plan of the EU to remove small businesses where there is an established big business option. Financial services, pharmacy, transport, etc. It is part of a centralized bureaucratic system: how could they and why would they want independent intermediaries? Any more than Stalin wanted small farmers !

A key industry player, Michael Spencer, said the Bank of England would better serve as central supervisor. "Box ticking and compliance alone, however ingeniously devised, can never create an adequate framework for every eventuality".

At the end of the day, a lot depends on the good will of the people (the bureaucrats, civil servants, etc.) implementing the schemes. We are overregulated although some may argue that this still did not prevent the mess.

One lesson from this crisis is that the current rules-based regulatory approach was not able to keep up with the speed and innovation of the financial markets.

A principles-based structure complements tailored rules by adding needed guidance and flexibility to desired policy objectives.

Regulation by objective rather than function would ensure that all products and institutions are over-seen based on identified risks rather than futile determinations.

It seems that wrongly the European Commission still wishes to remove small businesses where there is an established big business option.

“Big is beautiful” and “Too big to fail” remain the favorite options apparently of the EC (and maybe Mr.barnier?). We tend to be under the impression that the EC doesn’t like independent intermediaries – bancassurers look better, as much as Stalin didn’t want small farmers.

On the consumers’ side - 62 % are of the opinion that the global financial crisis was caused by a failure to implement existing regulation.

It would be good at this stage to take a look at what went wrong and why.

It is obvious that the current rules-based regulatory approach was not able to keep up with the speed and innovation of the financial markets.

A principles-based structure complements tailored rules by adding needed guidance and flexibility to desired policy objectives.

Regulation by objective rather than function ensures that all products and institutions are over-seen based on identified risks rather than futile determinations of whether an instrument is a security, a future, or a swap.

I like at this stage to quote Michael Spencer, chief executive of U.K inter-dealer broker ICAP PLC stating that the national central bank would better serve as central supervisor: “Box ticking and compliance alone, however ingeniously devised, can never create an adequate framework for every eventuality”:

We can’t ‘agree more!

Again, I would like to wish to all of you and your families a Happy New Year 2010!

I would like also to express how grateful I am for your continuous support.
We need you and now more even than before.

We went through some rather tough time in 2009 but my guess is that 2010 is not going to be fun...

In spite of the fact that 37% of European consumers feel more comfortable dealing through an intermediary than directly with a large institution, the regulators carry on targeting intermediaries by imposing useless rules: they did not learn from their past mistakes.

The regulators are just like the politicians who cannot limit the deficits they have created in order to gain votes: they believe that more regulation will solve the issues at no cost to them!

They better be careful: the initiative of the Madoff liquidator to take the CCSF (the Luxembourg regulator) to Court may be an example to be followed by many others…