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Advisers vent anger over RDR and rising costs in FCA survey

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Advisers have expressed “mounting frustration” over rising regulatory costs and the implementation of the RDR in a survey of all regulated firms.

The annual FCA Practitioner Panel survey, conducted in February and March and published today, shows 37 per cent of all firms believe the FSA was ineffective.

The FCA says much of the negativity was driven by small firms that have been affected by the implementation of the RDR in the last year.

The survey says: “Respondents believed that RDR was pushed through with no real thinking about how it would work in practice; the timescales and costs of implementation were unclear, and this resulted in the industry being hit with higher costs.

“There is strong underlying belief that ultimately the RDR does not benefit consumers as a large proportion of the population is now excluded from receiving advice.

“The implementation ‘on the ground’ has been poor and firms feel that there has been a lack of practical assistance and guidance.”

In addition, small firms feel “overburdened” with regulation and that they are not treated fairly over costs compared to large firms. IFAs and general insurance brokers complained about picking up additional costs from misselling scandals that they were not involved in.

Among all firms, the FSA’s key failings were identified as poor implementation of Treating Customers Fairly and the RDR, not being proactive, not doing its job properly in tackling misselling and being too bureaucratic and focused on red tape.

When asked what the negative consequences of regulation are, 51 per cent of small firms said lower profit margins. Almost four in 10 said it requires more resources, a quarter said inconsistent legislation, 24 per cent said it increases product prices while 20 per cent said to forces a withdrawal from certain sectors and 20 per cent said  it forces a withdrawal from certain customer groups.

Firms also said they found the FSA website and call centre “very frustrating” and can not always get answers to their questions. They want more specialist FCA staff to deal with specific areas.

The survey shows 55 per cent of all firms were dissatisfied with the regulator, including 16 per cent who said they were extremely dissatisfied.

FCA chief executive Martin Wheatley says: “From this last survey undertaken at the FSA, it is clear that firms believed there are some areas which could be improved.

“As the FCA, we have changed our approach and the way we regulate, and we are becoming a more forward-looking, predictable and engaged regulator which acts from a position of greater understanding of the industry.”


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There are 24 comments at the moment, we would love to hear your opinion too.

  1. Here we go. Already blaming it all on “the old lot”. Of course the FCA is completely diffferent and not at all just the same people under a different banner.

  2. I’m surprised its only 55% that were dissatisfied everbody I speak to thinks they were not up to the job.

  3. “Predictable and engaged”
    I predict if the FCA don’t engage with IFA’s they won’t have the funds left because the majority of Advisers that pay their wages will have gone away and the FCA will be looking at engaging the Firms remaining to fill the FCA black hole in their current financal and pension budgets.

  4. Incompetent regulators 3rd May 2013 at 9:20 am

    The regulatory system is in place for the benefit of itself and not for consumers or anyone else for that matter.

  5. Roman Duzinkewycz 3rd May 2013 at 9:22 am

    ‘…negativity driven by small firms that have been affected……’ Even now the FCA cannot see what is in front of them – do they not believe firms voicing their concerns? Obviously not – goodbye to them, and goodbye to the Financial Adviser community who continue to moan yet choose to do nothing as a collective – talk about a fool and his money………………

  6. Only 55% were dissatisfied!!!! I have not spoken to anyone who is satisfied.
    This survey won’t take into consideration the 23% of IFA’s who did not take part because they de-authorised last year, of which I don’t expect a single one to say they were satisfied

  7. “I’m dissatisfied with the Regulator, but not because of RDR.
    Most of the oppnents of RDR are in that boat because of a reluctace to change,an inability to move to a professional fee based model and the desire to retain a broken poor vaue comission sales drive model.
    As long as people persist in this sales driven mentality rather than advice driven then those people are going to fail and blame the Regulator for their failure to adapt better working practices.”


    I will now wait fr the flack and righteous indignation.

    Ian Coley
    Medical Investment Services

  8. Derek Bradley ceo Panacea Adviser 3rd May 2013 at 9:34 am

    “The annual FCA Practitioner Panel survey, conducted in February and March and published today, shows 37 per cent of all firms believe the FSA was ineffective”.

    I am frankly almost speechless that it needed a survey to reach this conclusion. And at what cost?

    If Martin Wheatley delivers on his statements above, I am sure many will be very pleased, but gaining a “greater understanding of the industry” should also include a recognition that escalating costs are such an issue today.

    He would be advised to read and digest the Regulators Code.

    The regulators code makes interesting reading.
    Its aim, well stated in a forward by Jim McFadden MP was to embed a risk-based, proportionate and targeted approach to regulation and enforcement among the regulators it applies to.

    The term ‘regulator’ is clearly defined in the code as any organisation that exercises a regulatory function.

    Importantly, the Code does not relieve regulated entities of their responsibility to comply with their obligations under the law.

    The code is based on the Hampton Principles and states regulatory activities should be carried out in a way which is transparent, accountable, consistent and proportionate; and that regulatory activities should be targeted only at cases in which action is needed.

    The following are among its stated aims and intentions consideration-
    • To act as an enabler to economic activity.
    • To consider the impact that their regulatory interventions may have on economic progress, including the costs, effectiveness and perceptions of fairness of regulation.
    • They should ensure that any decision to depart from any provision of the Code is properly reasoned and based on material evidence.
    • Where there are no such relevant considerations, regulators should follow the Code.
    • They should only adopt a particular approach if the benefits justify the costs and it entails the minimum burden compatible with achieving their objectives.
    • Regulators should seek to reward good levels of compliance by way of lighter inspections and reporting requirements where risk assessment justifies this.
    • They should also take account of the circumstances of small businesses, including any difficulties they may have in achieving compliance.

    The Regulators code of 2007 was seemingly overlooked by the FSA. It spelt out clearly what was not being applied to the thinking of the FSA in establishing the framework for the RDR.


    Did the FSA concluded that the concerns of so many, including MPs, in regard to the RDR are not relevant or are totally outweighed by other relevant considerations?

    The plate to step up to awaits, Mr Wheatley.

    Here is a ink to that code-

  9. Nigel Barker-Smith 3rd May 2013 at 9:49 am

    A large part of the population are now excluded from advice because they now, for the first time, know the true cost of advice.

    They wouldn’t have paid years earlier if they hadn’t have been hoodwinked into the conflict of interest that is (was?) commission!

    Financial education at school would in some part solve the savings gap not expensive financial products and an advisory industry that for many years has in general added no value to society.

    This is an opportunity to show the good in our profession and win back client trust, by making a difference to their lives, not their money.

  10. @ Nigel Barker-Smith. I dont know what line of business you are in or how long you have been in it but from where I sit as an adviser, from 1989, and in the last 10 years always gave my clients a choice of paying by fee or commission. The cost to them was the same so it made no difference to me and guess what? All barr a handful went down the commission route. Commission system worked and worked well for the provider to make a profit, IFA to make a profit and clients who got (on the whole) suitable products that solved a problem. IFA’s are THE single most trusted section of the entire advice sector – always have been and probably always will be so I dont know what you are talking about when you harp on about the winning back client trust. In 99.9% of the time, clients trust their IFA. Maybe its you that has to try to win back trust, I am not sure but how dare you tar us all with your own brush.

  11. Dick Sprinkler 3rd May 2013 at 10:49 am

    Marty – dead right !

    This trust thing in the main is a red herring put around by the Regulator etc.

    I’ll go a little further if a ‘company’ of ‘advisers’ came along now and were in isolation of RDR allowed to sell and charge ‘commission’ particularly on regular premium business (indemnified or factored) they would thrive !! Whilst those that charged a fee transparently or otherwise would continue to do so – guess what the market would decide !!

    Go on I dare you FCA !

  12. Ian Coley | 3 May 2013 9:28 am

    I totally agree with you!!!

    The reasons why I am upset with the old FSA is that it was terrible at enforcing basic authorisation rules for the financial advice profession. After all how many unauthorised websites and advice givers have the old FSA given exemptions to. If we no longer get paid for just implementation products then the rule book needs to be amended to cover what financial advice actually is.

    I would also like to see the FCA give an annual report on how effective it is on meeting its statutory objectives as some of these are measurable e.g. protecting customers how many websites and unauthorised advice givers have the FCA close down over a 12 month period will be one indicator that would be interesting to advice giving profession.

    I also believe that by producing such data on a regular basis the regulator starts cover some of the things mentioned in Derek Bradley’s comment above.

  13. To say that consumers would not have taken advice had they known true cost is rubbish. Commission could have been capped and clients given choice to how they pay. You dont see consumers paying cash for cars but HP -high interest wasting asset. RDR is the biggest threat to savings for the majority . If those who cannot pay up front go DIY they will probably buy something totaally unsuitable and suffer later

  14. Two points spring to mind here. To have a 55% dissatisfaction rating is almost unheard of. For there to be so many specific comments on points of dissatisfaction is quite damning.
    The response by the FCA – “there are some areas which could be improved”. Some. How about the whole ruddy lot. Maybe they have changed their approach, but 2 points to starboard is hardly a major change of direction in the face of such utter condemnation.
    The second point is the shear lack of understanding of the problems by the general public, as epitomised by the naive comments of Nigel Barker-Smith. Firstly the public have known the true cost for at least 20 years through commission disclosure.
    Secondly, the evidence covering conflict of interest in relation to commissions is at the very least ambiguous. There are reports that state that such conflicts cannot be shown to occur on any meaningful level.
    Thirdly, there is no evidence that financial education would have any material effect – has the study of physics increased the number of people who maintain their cars? Has the teaching of maths improved the number of people who understand percentages?
    Fourthly, were is the evidence that the savings gap is caused by the cost of financial advice?
    The financial industry is riddle with fairytales, with unsubstantiated opinions, with media driven myths. The biggest crime has been the lack of a concerted effort by the adviser industry to replace these myths with hard facts. The AIFA should have been leading the way.
    Its one thing knowing you are doing a decent job for clients, but in a world that loves adverse trivia it is necessary to to demonstrate the absolute falsity of the general perception.
    The FCA have now put some numbers to some perceptions. Isn’t it about time advisers also acted with a bit of professionalism and produced some positive numbers of their own.

  15. Yes Glen myths is about right !

    Only in the minds of theorists – naive is understating it !

    Given its first 4 months, (this damning indictment being the latest outpouring), I think RDR might well do the job for advisers on its own as far as perceptions are concerned.

  16. I guess we can only wait to see if Mr Wheatley is a better listener than was his predecessor and takes meaningful action to untangle the unholy and poisonous mess he’s inherited from the FSA.

  17. RDR by the FSA’s own admission was based on flawed interpretation of data but they carried on regardless towards the cliff like lemmings on some sort of crusade to rid the world of those pesky advisers.

  18. A poem for the outgoing FSA and for the incoming FCA.
    “O what a tangled web we weave when first we practise to deceive”

  19. I suspect Glen misunderstands the purpose of a regulator. The satisfaction or otherwise of the industry it’s there to regulate is unlikely to be the primary measure of its success. From some of the infantile responses It’s also clear that too many in the industry remain in denial.

  20. Soren Lorenson 7th May 2013 at 10:23 am

    The problem with the commission verses fee debate that always rages as soon as RDR is discussed is that the fee we are now obliged to charge does not reflect the cost of the advice that the client receives. It reflects the cost of distributing the financial product, a cost that in any other industry is included in the product price by the manufacturer.

    It also includes the cost of regulation and liability.

    If Ford makes a dangerous car it is Ford that pays the compensation. To extend the analogy to financial services Ford could produce any old wreck and know that the dealer would be the one to pay, whilst Ford’s execs get off scot free.

    The motor industry doesn’t work like this and that is why companies like Ford produce excellent cars. They know the liability lies with them.

    Look what happens when an out of control regulator with a low approval rating moves the goal posts. Chaos.

  21. @ Soren

    Some good and fair points but I don’t think it’s that simple.

    The cost of financial products should now have the distribution costs largely stripped out. If they don’t then the market will probably put this right over time. Possibly with some intervention from the regulator.

    If a car dealer sells a family of four a two-seater sports car to use as family transport then it’s hardly the fault of the manufacturer. There are few inherently bad products in financial services. Most have their place when used appropriately and those that are bad tend to verge on illegal or are illegal.

  22. @ Grey Area
    NO the manufacturer doesnt pay, but then neither does the dealer himself, and definitely not any other dealers who had nothing to do with the original transaction.
    This is whats wrong with our particular part of the industrys regulation – look at the zany PI costs with which we are afflicted for the proof.
    Your family of 4 was probably spending £30,000 on their car, and yet they are expected to have half a brain and to take responsibility for checking what they are buying. In our world, they might only be putting £10k at (minimal) risk , but they have zero responsibility and we are expected to get everythign so perfect and superbly documented that we’d have to charge them so much that its not worth them paying for it at all.
    Bonkers the whole system.

  23. Soren Lorenson 7th May 2013 at 2:39 pm

    @Grey Area

    I was thinking about KeyData and Arch Cru when I wrote that. They are products that were actively dangerous but the danger was hidden from advisers (I didn’t advise on either of these products BTW).

    In your example the car dealer would simply look at the returned 2 seat car and say to the family of 4, “it had two seats when you bought it – nothing has changed”. As Analogies says, the client would be responsible for a stupid decision.

    I guess within all of this confusion about cars etc, the point I was trying to make is that the advice fee is a pretty hard sell because it carries a number of costs that should not be there and are in no way advice.

  24. @ Soren

    Your point is a good one.

    I apologise for the analogy. It was meant to illustrate the principle not be a real-life example. If that did happen I suspect the stealer would follow up by selling a roof rack and child seats…

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