The paper titled ‘Consumers: Discussions of Duties’ says the RDR’s declared intention to see a “market which allows more consumers to have their needs and wants met” and its recognition that many consumers “lack the knowledge to grasp many of the complexities” of financial services are at odds with its proposals which will actively reduce access to advice.
It points out that the FSA, having already identified that the RDR may lead to fewer firms and advisers, states “these consumers may have less complex needs than those who are more affluent and therefore may not require such a comprehensive and expensive full financial advice service”.
But Aifa queries why those with less money and less ability to recover from a financial set back should receive a “cheap and cheerful” solution despite having to negotiate the rigors of the benefits system and pension credit.
The paper says while consumers need to be better informed and more confident about their finances they cannot be expected to achieve the same level of knowledge that a qualified financial adviser has therefore “information asymmetry is and will remain a feature of retail financial advice for many”.
But it says: “To achieve symmetry we need to address the imbalance through improved financial capability, fair value products that offer clear benefits, professional standards from those providing advisory services and effective regulation. Only with a combined effort will consumers have confidence in financial services.”
The paper also suggests a five year time limit for adviser liability. Seventy per cent of people, according to a YouGov survey, thought the maximum period an IFA could be held responsible for the advice given was 15 years, or until the end of the relationship. The paper says: “A house is built to last more than 15 years yet the builders and architects’ liability does not last for as long as the house stands.”