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Anger over opt-out call for HNW clients

Advisers have hit out at the Treasury select committee for supporting the banking sector’s argument that high-net-worth clients should be able to opt out of the RDR regime.

In its report on the RDR, published last week, the committee notes concern from JP Morgan that non-UK funds will not bring their product structures in line with the RDR, potentially limiting products available to HNW clients or increasing their cost.

It also highlights points raised by Barclays, which argues that some measures in the RDR are inappropriate for the “competitive” HNW market which involves “internationally mobile clients” who are often more financially sophisticated than mass-market retail clients. The bank closed its retail advice arm in January amid plans to focus on its HNW proposition.

The TSC says: “We note concerns of firms that the RDR may have a deleterious impact on their ability to provide a full service to high-net-worth individuals. We recommend the FSA examines how to allow high net worth individuals, as determined by the FSA, the opportunity to opt out of the RDR. This should also mean they opt out of most or all protections that retail customers receive.”

The committee says the FSA should report back on the potential scale of the issue and whether the RDR could be modified to address these concerns.

Jonathan Fry & Co private wealth director Jonathan Fry says: “Banks do not want to discuss fees with their clients, especially with high-net-worth clients, where the fees can be very high, so this smacks of self-interest. If the banks get away with this, it will be quite a coup.

“The RDR is forcing many advisers to move towards the HNW area and if those clients are allowed to opt out, who exactly will the RDR apply to?”

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