MM Leader: FSA should not fear rethinking the RDR
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Comments suggesting the RDR “only just survived” an FSA executive meeting in March and that the regulator is “not particularly proud” of the review have caused quite a stir.
The fact they have come from one of the most well connected and influential regulatory names in the sector makes them particularly notable.
At last week’s Protection Review conference, Lansons director of regulatory consulting Richard Hobbs told delegates the RDR was now a question of “losing face” and will go ahead as planned.
The allegation that a primary driver for the continuation of the RDR is that the FSA is embarrassed about changing its mind is serious and requires an explanation from the regulator.
It is normal and healthy to have full and frank debates within the upper echelons of the FSA about policy direction. There are always going to be differences of opinion and you would expect at least some FSA directors to share similar concerns to much of the industry on aspects of the review.
But if the FSA has become blinkered in its assessment of the effects of the RDR due to a reluctance to “lose face”, then this folly will be remembered long into the future.
The FSA should not be afraid of pressing the pause button, or even the rewind and erase buttons, if it believes a fundamental readjustment of some of its plans is required.
The objectives of the RDR are admirable and a more professional IFA sector using a more transparent charging structure will benefit advisers and clients.
But there are some big concerns over the implementation and success of the RDR that should not be ignored, particularly on consumer access.
What better opportunity than the introduction of the Consumer Protection and Markets Authority to ensure we are moving all aspects of the RDR in the right direction?
In a speech last week, Lord Turner asked some very pertinent questions about the type of regulator the public wants. This included debate over consumer choice and whether the regulator should have a competition remit. How about a regulator charged with getting more people saving and protecting themselves?
Any new powers have the potential to greatly improve the way the industry is regulated.
What a great shame if any opportunity to improve the RDR is lost because the FSA does not want to lose face.
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Readers' comments (5)
Kevin Simpson | 22 Jul 2010 10:41 am
"The objectives of the RDR are admirable and a more professional IFA sector using a more transparent charging structure will benefit advisers and clients."
Mate what planet are you living on, lets be totally honest here the only people who will benefit from the RDR are the Banks who will have a larger distribution channel of none high net worth customers who will then be soundly ripped off. The vast majority of the population will not have access to Independent advice as they will not be deemed High Net worth enough to be cost effective. My client bank are from the north west and consist of 80%working class "normal" type people with 20% who have higher income or decent size funds under management. Do I decide as some others within the sector suggest cast adrift these people or do I carry on dealing with these people at a loss come 2012. If the object of the exercise is to give more people access to financial advice the FSA are definately going the wrong way about it. I would suggest they need to bite the bullet and "lose a little face" by scrapping this nonsense. If Commission bias is the issue this is easily solved by capping product commission at 3% for investments with a trail of 0.5% agreed with the client. As the annoying little rodent says "Simples"
I know im setting myself up for a kicking from the people who are already fee based practices or have HNW clients coming out of there ears in the home counties, but spare a thought for the people we are leaving behind.
You may notice I have not mentioned Qualifications. The diploma is something I am working towards currently but I totally understand the feelings of the older IFAs who are highly experienced but are told if they dont achieve certain standards they are out. I didnt hear the same thing placed at the door of nurses recently as the new regs for them only apply to new entrants. These people are in charge of our lives not our money so you can probably see the disparity. Wake up and smell the coffee in 3 years time its to late to go back something needs to happen now.
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Evan Owen | 22 Jul 2010 11:57 am
Lord Turner has been busy using the word 'balance', and the phrase 'follow the money'.
Guess where the FSA got these ideas from from.
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Sam Caunt | 22 Jul 2010 3:26 pm
I have one real fear about the RDR. I fear that VAT will be payable on adviser charging. At 20% that is a huge burden on consumers and one that is sadly lacking in the FSA's consultation papers. It is a significant cost and I cannot see how the RDR can be acceptable and introduced in any form until this issue has been resolved. Not one for conspiracy theories but I do wonder whether the FSA have a good idea about VAT, been given a nod by HMRC but have refused to discuss it for fear of threatening their agenda of overhauling the industry. With everyone so far down the line towards 2012 when the issue of VAT is finally resolved, the howls of anguish will be to late.
Will VAT apply to adviser charging - it is fundamental? The silence is deafening.
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Alan Lakey | 22 Jul 2010 4:08 pm
Sam, I envy you. If I only had one fear about the RDR I could sleep better at night.
This industry has recocheted from one regulatory intrusion after another and as an industry we deserve a period of stability.
If we look at the problems within the industry we can see that many have been aggravated by the regulator, many are down to the banks and their processes and some relate to the bad apples in our barrel.
Sensible regulation would be non-intrusive, balanced and focus on the obvious areas of consumer detriment.
The RDR achieves none of these things. If I was a director at the FSA I too would be embarassed no, ashamed, of the output and waste of millions of pounds on consultations and the like.
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Julian Stevens | 23 Jul 2010 7:37 pm
The FSA has no shame, Alan, nor consideration for the issue of collateral damage. Some might say that it refuses even to recognise the very concept.
Many IFA's are willing to admit that elements of the RDR have merit ~ I for one have, since 2001, operated on the basis of CA Remuneration. And I have seen no arguments against the potential benefits of higher qualifications. But that doesn't make it right for the FSA to confiscate the livelihood of anyone unable to pass a load of exams merely to satisfy some arbitrary benchmark.
The biggest problems at the retail end of the industry, which the FSA remains obstinately unwilling to admit or to act upon, are target and commission driven sales practices. These are the standard modus operandi of the banks. On the strength of all the hard data in respect of complaints, rejected complaints, rejected complaints referred to the FOS and rejected complaints referred to the FOS which are then upheld in favour of the complainant, the banks are something like THIRTY times worse than the IFA sector.
Yet the FSA refuses even to acknowledge this, let alone discuss it or adjust the proportion of its regulatory firepower allocated to where the real problems lie.
The best we can hope for is that a sustained and united campaign in the direction of our MP's will lead to the CPMA being held accountable if it fails to undertake its regulatory responsibilities in all the ways in which the FSA is supposed to (and indeed, in which it falsely claims to) but which it manifestly does not.
If enough voices are raised in protest, the message may eventually get through to those in a position actually to get something done about it. So don't lose heart and don't give up. Write to your MP (but don't bother with Mark Hoban ~ he is not our ally in any shape or form).
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