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Aifa warns of cost of RDR advice gap

Aifa has set out six guiding principles it believes regulation should adhere to and warned the RDR risks falling short of these objectives.

The trade body and its council have produced a report entitled ‘A Manifesto for Regulation’ which sets out the six high level principles Aifa believes should apply to the governance of regulation.

It says regulation should enable better outcomes for more consumers, have the appropriate checks and balances in place to ensure accountability and work in a proportionate and risk-based way.

Aifa also wants to see fewer regulatory changes, with fewer ‘new ideas’ and more consistent delivery instead. The manifesto calls on regulation to be cost effective and take into account regulatory changes at a European level.

Aifa calculates that if 10 per cent of the IFA sector left the industry as a result of the RDR there would be a drop of £650m in long-term business in one year.

It also calculates that sales of investment funds would drop by £1.76bn and there would be a 2 million drop in the number of individual pension policies, reducing the level of pension benefits paid out by £4.4bn.

Policy director Andrew Strange (pictured) says: “Constant regulatory flux deters financial investment in firms and weakens consumer trust in the sector. Regulation must be cost effective and focused on those that pose the greatest risk and include robust external accountability mechanisms.  

“Judging the current RDR by these six principles there is a real danger it will be seen as a failure.”

He adds: “The success or failure of regulation in the future needs to be measured against these standards. This will deliver a better outcome for consumers, the advice profession and the financial services industry.”

Reiterating Aifa’s support for Money Marketing’s Pave the Way to Save campaign Strange argues the new regulator needs to help consumers re-engage with their finances, with the Consumer Protection and Markets Authority given a statutory objective to close the savings and protection gap.

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. “We don’t support the RDR”

    “We do support the RDR”

    “We don’t support the RDR”

    Make your minds up!

  2. It was Rip van Winkle that fell asleep and woke up twenty years later, having missed the American Revolution, the death of his wife, the marriage of his daughter and the birth of his grandson.

    Well here we have “Rip Van (AIFA) Winkle” they fell asleep only to wake having missed RDR, the death of independent advice and the rise of bancassurance. Perhaps better late than never AIFA!

    But where did AIFA get the 10% from?

    David Cox – SuuqeaMarch said: “Two million clients could be left without an IFA after RDR – 40% could leave the industry”

    Shaun Crawford, head of insurance advisory at Ernst & Young, said The FSA’s Retail Distribution Review will have the following effect: Of a population of over 30,000 advisers, many industry commentators are expecting at least a third to leave by 2012.

    AVIVA Life marketing director David Barral has said the firm predicts by 2013 IFA numbers will fall to 10,000 in total as advisers fail to comply with RDR changes, leaving middle-market consumers unserviced. No surprise then that Aviva wants to grow its tied in-house channel to target 2.7 million ‘orphan’ clients whom were originally IFA clients. So much for consumer choice!

    Stephen Gay – Aviva said: “The regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes”

    FSCC said : “Financial advice will be less widely available post RDR”

    Even Deutsch Bank report: “There has been industry talk of 30% or even 50% if IFAs exiting the industry post 2012, which is not impossible”

  3. Hot air and horseshit ~ pretty much AIFA’s standard output these days, sorry to say.

  4. AIFA your ‘maifesto’ is welcome but why not 18 months ago?

  5. Figures provided by Matrix-Data Solutions (in June 2010) showed there were 32,000 advisers in 2008.

    However, this plunged to 30,198 in 2009 and currently stands at 28,714 and still falling.

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