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.