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A mission to save


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


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. There are a number of obstacles to the well reasoned aspirations outlined here.

    Firstly, the FSA has declared it has no intention of moderating the requirements of the RDR. Mark Hoban has endorsed this obdurate stance. This is in spite of the FSA having been forced to admit that its original Cost:Benefit analysis (commissioned to a third party consultancy at vast expense) was massively skewed and inaccurate. Will a refund (of our money) be sought from the consultancy which produced this complete mess of an analysis?

    Implementation of the RDR is, we now learn, going to cost hugely more than first estimated, both in human as well as financial terms. It has been reported that the only reason the FSA hasn’t binned the whole idea is due to fear of losing face. Never mind the costs and the worry to many good IFA’s or the potential disruption to the public’s access to affordable independent advice. Above all else, the FSA mustn’t be seen to lose face. As always, collateral damage is of secondary importance.

    Secondly, the FSA has never once, as far as I’m aware, made the slightest effort to deny accusations from the IFA sector that the regulatory playing field is significantly tilted in favour of the banks. From this, it is not unreasonable to assume that this is indeed the case. And it isn’t just because of an entrenched old school tie relationship between the top people at the FSA and their counterparts at the banks. I have it on good authority that the real reason is because whenever the FSA starts making noises about tougher regulation of the banks, a few senior people at those institutions put in a few calls to the Treasury saying basically that if it [the Treasury] doesn’t call off the dogs PDQ, they [the banks] will have to consider relocating their operations overseas, with all the consequent loss of UK jobs and tax revenues.

    So a call goes out to the FSA to continue looking the other way and instead make itself look busy by concentrating its firepower on the IFA sector with such projects as the RDR and further “thematic” (for which read hindsight) reviews of past business.

    As a result, the banks continue to enjoy laissez faire regulation of their blatantly target-driven, high commission sales practices and fob-off complaints handling procedures. Consumer confidence in financial planning continues to be undermined and the banks continue to enjoy light touch regulation whilst the IFA sector continues to be constantly under the cosh. Is this the FSA’s idea of promoting confidence in the UK’s financial services system?

    The banks have no interest in in encouraging long term savings, for the simple reasons that long term savings plans no longer generate large upfront commissions. They also require ongoing monitoring and servicing. The banks, as we know, don’t “do” ongoing monitoring and servicing. Readers may have heard last week’s MoneyBox programme on Radio 4, which backs this statement to the hilt.

    So, unless and until the FSA has the balls and the integrity to stand up to the Treasury telling it to leave the banks alone and makes some effort to reduce the twin burdens of cost and bureaucracy imposed on the IFA sector, what hope can there be for more people being encouraged not just to enter into long term savings commitments but, having done so, to stick with them? I just don’t see that the current regulatory landscape encourages that and nor do I see any moves to address the issue.

  2. As Julian says RDR will not solve many of the problems we now have, many of which are a direct result of the ever changing “on the hoof” regulation we have had over the last decade.

    As the article says the cost of regulation is now a massive and growing industry, so massive it is starting to affect everyone’s investments, pension and protection policies.

    RDR will take at least a decade before everyone gets used to paying for advice, but I doubt it will mean progress for many and it certainly won’t stop miss-selling.

    For me regulation as we know it is just a massive cost that far exceeds the benefit and sadly everyone is paying the price for this misguided method to control advice.

    As Ivan Martin has said regulation is now a massive and expanding industry whilst the industry it regulates, for many ordinary people, is contracting, largely due to the cost and effects of regulation, but it is not contracting due to poor advice.

    A classic case of the cure that ends up killing the patient and at a huge cost

  3. Mark (rubber stamp) Hoban interpretation of Conservatism is not what I voted for. In fact Mark (rubber stamp) Hoban acceptance of RDR proves the existence of consensus politics. He proves the view that “they are all the same”. It is the executive that actually runs UK plc and not politicians or at least not politician lacking in moral fibre! The FSA is an unelected unaccountable member of the executive about to reinvent itself with Markn and his rubber stamp at the ready.

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