I have asked the FSA to demonstrate that there is a foundation for its view that commission distorts sales and that banks offer a worthy solution to the savings shortfalls of middle to low-income groups.
The FSA has supplied neither and therefore I conclude that the RDR is without foundation, perhaps even a manifestation of vested interests and the desire on the part of banks for a return to tied distribution and a captive market.
In the past, stakeholder has showed that the removal of distribution costs results in a removal of distribution and likewise the RDR removal of commission from “independent advice” will have the net effect of the removal of independent advice from middle to low-income groups.
The history of UK banks does not suggest that they are capable or worthy of servicing middle to low-income groups as proposed by FSA director wholesale firms division Dr Huertas. The very same income groups are saying the same and now we are seeing that the FSA’s love affair with banks is in part responsible for fuelling a system under which banks such Northern Rock grow rich using cheap debt.
The FSA is over-regulating IFAs and under-regulating banks.
Northern Rock shows the banks as the problem and not the solution and that it is time for the FSA to focus on those aspects of the financial system that do not work rather than attempt to destroy those that do.
Remember that independent advisers generate 80 per cent of distribution but are only responsible for 14 per cent of complaints.
The FSA retail distribution review contravenes European Law and would reward those responsible for 86 per cent of complaints (banks in the majority) by giving them 80 per cent of distribution.
After Northern Rock, the FSA will find the pro-bank retail distribution review a little hard to foist on the consumer and the financial industry as a whole. It is time for the FSA to wake up and smell the coffee.
Temple Bar IFA