Skandia's Mann says restricted advice regime will be abused
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Skandia chief development officer Peter Mann says the RDR’s disclosure regime is a “fudge” and is warning that restricted firms will abuse it.
In an interview with Money Marketing, Mann says he likes the restricted advice concept but tied advisers will not clearly represent themselves to consumers.
He says: “The disclosure regime is a fudge and will get abused. If an adviser is not independent, that needs to be disclosed and oral disclosure will not be effective. Some advisers who move to restricted advice will not want to appear sub-optimal and will try to hide it.
“There is nothing wrong with restricted advice, I just worry that consumers will be confused about what it means. Even if the FSA enforces a set script, how will it police what advisers say or how they say it?”
Mann says the solution is a standardised written form of disclosure that sets out what restricted advice means, which the consumer signs to indicate that they understand the service on offer. He says: “The wording needs to be short, sharp and precise and leave no doubt about what a restricted adviser can and cannot offer.”
Mann is also concerned about the likelihood of advisers being able to move to adviser-charging in time. He says it may not be practical to expect firms to implement adviser charging by 2012 and urges the FSA to review its deadline. He says: “There is an argument for a review of what is practical to achieve in what timescale.” Mann says the capital requirements are a “draconian regime” for mid-sized IFAs which will not ensure an orderly wind-up of firms if they go bust. He says: “A minimum of £20,000 feels like a sensible number but it has not solved the problem. The reality is if a firm is going to go bust, it is going to go bust. It will not use capital adequacy reserves to wind down.”
He says firms with between five and 25 advisers will see significant increa- ses in their capital-adequacy requirements and it will prevent them from investing in their businesses.
Mann predicts that there will be fewer independent advisers than at present but questions the high fallout in adviser numbers forecast by some. He says: “We will see a different shape to the industry but the IFA market will be strong. We will have a vibrant, restricted community and advice will be accessible. I do have some concerns about how the masses will get advice, though, so it is important that we find a way to make basic advice work.”
On the issue of the long stop, Mann says he finds it “unpalatable” that there is not one in place for IFAs and advisers should not be held accountable for work they did many years ago. However, he is doubtful that the FSA will change its mind, adding: “There are battles you can win but this is not one of them.”
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