The regulator hired Deloitte which asked advisers and providers to estimate the potential costs. The 620 intermediary and 68 provider e-survey responses and 13 qualitative interviews helped the FSA estimate a one-off cost of £430m and ongoing annual costs of £40m.
Syndaxi Chartered Financial Planners managing director Rob Reid says many estimates came from advisers who are yet to move to new remuneration methods and cannot be relied upon.
Reid says: “Many of the adviser respondents have never given fee-based advice before and probably have no set processes written down so it is hard to see how they could determine what the costs would be.”
Simply Biz managing director Ken Davy says: “The estimates on costs are so woefully inadequate as to raise serious questions over many of the proposals and most certainly their timing.”
Ernst & Young says the costs of shifting to adviser charging in particular are “grossly underestimated”.
Positive Solutions chief executive Jim Reeve says: “We are talking fundamental changes to computer systems, changes to processes, training and education of advisers, the reshaping and restructuring of products. If you add all that together, I think the costs are far in excess of what is outlined.
“The regulator obviously thought that this methodology was sensible but now that people know the broad framework, it should ask the main life offices and the advisory firms what they think again to get a far more accurate picture.”
In the research, Deloitte says “firms may have experienced difficulties providing accurate cost estimates” as requirements were not confirmed, adding that the results “cannot be considered statistically significant”.
An FSA spokesman says: “We commissioned Deloitte to carry out an extensive survey. That fed into this paper, which we think provides a very detailed analysis of what the costs and benefits are from the RDR package.”