The success of the retail distribution review hinges on the benefits to the UK public out-weighing the cost of delivery. Yet the RDR has lost sight of some of its key objectives and the net result threatens to be detrimental to consumers, the financial services and the wider economy.
However, the current trend of ever-decreasing circles – with fewer IFAs servicing fewer people – can still be reversed and the UK’s savings ratio improved if the regulator is given a more progressive mandate by the Government.
Independent studies prove that people who receive professional financial advice recognise the benefits and trust their adviser. The FSA has acknowledged this.
Sesame Bankhall Group supports the drive towards higher professional standards and greater transparency as firm foundations upon which to build consumer confidence.
But instead of the FSA delivering on its objectives, including widening consumer access to financial advice, we are left with RDR proposals that will reduce access, cut the number of advisers and cost the industry £1.7bn.
The FSA’s own RDR cost benefit analysis predicts industry costs will soar and we will lose 23 per cent of firms. More than one in 10 people who currently have access to financial advice will lose out.
Professional financial advice will become the preserve of the wealthy. The mass market will find itself underserved or not served at all.
The RDR has evolved to become a set of proposals focused on minimising the risk of misselling. As a result, we face the bizarre outcome where the only growth area will be regulation itself.
It is time for a more progressive regulatory agenda. Britons need to save more and the regulator should be handed a statutory objective to improve the savings ratio.
A more constructive approach would be consistent with the shift away from the state towards private provision.
We need to grow the UK’s regular savings market – not stifle it further. We have to make it easier for people to save. Product design is important but must be combined with a regulatory environment that offers incentives, along with a strong advice profession that encourages and guides people.
The restructure of the regulatory system provides the opportunity to make this a reality.
The Government must grasp this moment and help break the cycle of spiralling debt for the benefit of generations to come.
Our message is clear – IFAs will deliver higher professional standards and remove commission from investment products but there should be a regulatory dividend to reward quality firms in return.
Work with us to design simpler advice models that improve access to advice for ordinary people. Embrace the need to improve the UK’s savings ratio and recognise the pivotal role of a strong and sustainable advice profession in achieving this goal.
Ivan Martin is executive chairman of Sesame Bankhall Group