FSA delays RDR paper due to TSC consultation
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The FSA has delayed publication of its RDR professionalism policy statement, due this month.
In November, the Treasury select committee launched a consultation on the RDR and is seeking written evidence on whether the RDR will achieve its stated outcomes.
The FSA says it wants to ensure it has an opportunity to provide the Treasury select committee with a “comprehensive rationale about why it remains committed to delivering the RDR”.
The FSA says it plans to publish final rules and a policy statement in January 2011 and “remains fully committed” to implementing the RDR in January 2013.
In a letter to committee chairman Andrew Tyrie dated December 13, FSA chief executive Hector Sants set out why the regulator remains committed to the RDR.
Sants writes that problems with mis-selling scandals and a lack of consumer trust continue to exist in the advice market and that fundamental changes are needed to address these issues.
The FSA estimates the average cost of annual consumer detriment caused by unsuitable product sales to be between £400m and £600m.
Sants says the RDR will ensure customers get good quality advice, products and services suited to their needs from advisers displaying higher standards of professionalism and expertise.
He adds the regulator does not agree with the argument that the RDR will threaten the availability of good quality advice.
Sants says: “Any dilution of the proposals will result in an increase in the cost to consumers through continued mis-selling.
“Despite the vocal concerns of some in the IFA community, we believe the RDR is absolutely fundamental to address the root causes of numerous problems we have observed in this sector and to improve consumer outcomes.”
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Readers' comments (30)
Tom Scott | 15 Dec 2010 11:33 am
This remains a massive experiment with other peoples livelihoods.
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Pissed Off IFA | 15 Dec 2010 11:45 am
Do the FSA really know what they are doing? Perhaps, they are looking at themselves and wondering if they are ready of the implementation of the RDR.
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Bob Donaldson | 15 Dec 2010 11:59 am
I would like to see Hector Sants evidence on all this particularly as relevant to the independent sector.
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Colin T | 15 Dec 2010 12:11 pm
Well, planet sants is alive and well.
Sants writes that problems with mis-selling scandals and a lack of consumer trust continue to exist in the advice market and that fundamental changes are needed to address these issues.
Yes Mr Sants - the BANKS are where you need to be looking. 60% of claims against 2% claims IFAs. Get a grip!
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Jim Jarvie | 15 Dec 2010 12:16 pm
The FSA says it wants to ensure it has an opportunity to provide the Treasury select committee with a “comprehensive rationale about why it remains committed to delivering the RDR”.
Surely this would have been done BEFORE they progressed so far?
The FSA believe extra qualifications and the ban on commission will prevent miss-selling scandals - you must be living in another world!
I've said it before, MAXIMISE commssions on all regulated products. Reduce the BLURB in Key Features Docs, standardise Fact Finds, standardise Research requirements and have all suitability reports SIGNED by clients.
Too simple for the FSA to impose?
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Steven Balmer | 15 Dec 2010 12:33 pm
Most IFA's who do not miss-sell products would be glad of greater personal accountability and this is where the focus should be set. Getting rid of poor advisors will benefit everyone but a sniper approach is required, based on fact and not fiction. If the FSA can prove RDR will do this why not simply give evidence to this point? This being the case they will undoubtedly encounter far less resistance and dare I say support from the IFA community. As it is the FSA have put back amendments to approved persons regime and continue to neglect to clarify reasoning for their stance. Based on the published complaints data they continue to alienate the IFA community and show huge bias towards direct sales models. Mr Sants should abandon his God Syndrome approach as RDR and MMR in current form continues to fail, if in no other way a by lack of clarity. Consultation should be a two way street and such defensive attitudes makes a mockery of this process.
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Rod Leonard | 15 Dec 2010 12:35 pm
Mr clever Sants, even if it were £600 million do away with the FSA and the cost of the FSCS and FOS, give the money to the courts and have a simplfied court system for claims to be made in accordance with the laws of the land and the human rights act.
Simplezzzzzz
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Glen McKeown | 15 Dec 2010 12:39 pm
What are the FSA saying? That the average loss per person is between £400m and £600m, which is absurd, or the loss per annum, spread over the total advisor population is between £400m and £600m. As the FSA do not provide background figures let us assume there are 30,000 advisers each with 150 clients. Using the top line figure of £600m indicates an average personal loss of £133. They could lose more than that on a bad day on the Stockmarket - or it could be the cost of an hours advice.
In fact it probably costs a client that much annually in the redistributed costs of the FSA.
This is creating rules by distortion - think of the biggest figure you can get away with and flog it to the gullible press.
Then lets move on to the other distortion. Sants implies that consumer do not get good quality advice, products and services at the moment. Firstly there is little hard evidence about the overall quality of advice; merely stories. Secondly, Advisers do not provide products ( and all the available evidence suggests that the products they use are market best). Thirdly, what does he mean by services, e.g. the appalling administration provided by insurance companies? Why lump that on advisers, when the FSA have always turned a blind eye to improving the quality of Insurance and Investment Company administration.
Mr Sants should further consider the various reasons for the alleged low consumer confidence. If the industry regulator is constantly shooting that the advice is poor, then the public are likely to believe them. In which case any change of regulatory pattern is not going to improve that perception. On the other hand shutting up will improve general confidence, it costs nothing, and lets everyone concentrate on improving a reasonably good industry. Its the “give a dog a bad name” syndrome - yet there is precious little hard evidence that the advisory sector is seriously flawed. It can be improved, but then so could every industry I can think of. And so could the FSA.
And to maintain that the RDR does not threaten the availability of good advice is pure ostrichism. The availability of any level of financial advice has already been removed from whole layers of society; adding yet more costs onto the advice process is not going to reverse that trend.
If this is the intellect that is now going to take over macro-regulation of the British Economy I am tempted to pack my bags and go now.
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Anonymous | 15 Dec 2010 12:42 pm
No doubt they are "sexing up" the dossier as we speak
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Paul Violet | 15 Dec 2010 12:43 pm
"The numerous problems we have observed in this sector", as stated by Mr Sants.
It's good to know that after goodness knows how many years of walking around (not running) like headless chickens, completely unaware of what was going on around them, it has been 'observed' that there are numerous problems in the sector!
Although there is no way to be sure that you are looking at the right part of the sector, Hector!
With the FSA's track record I would think that is the very last organisation that should try to fix the problem.
The FSA is not fit for purpose. Let it die quietly, and not be allowed to leave one more major cock up for everyone else to sort out, as they have been doing since inception.
However, with the same person charged with running its replacement, eveything should be just fine and dandy in future.
Heaven help us!!!!!!!!!!!!!
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