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BBA hits out at RDR impact on consumers

The British Bankers’ Association has hit out at the impact the RDR is having on consumers just over two months after the new rules came into force on 1 January.

Speaking at a Westminster Business Forum event on retail banking today, BBA executive head of retail Eric Leenders said customers are being left under-served.

He said: “There has been market exit because of the RDR. It has left the mass retail market under-served in terms of face-to-face, long-term savings and investment advice.

“Simply, firms have moved out of the market. It is a very good example for access to markets to be considered through statutory objectives at the regulator.

“We did a lot of work trying to find some compromise or alternative solution such as advice light, directional, information at the time of the RDR but ultimately it did not prevail. We would argue that we want to be providing advice across our customer base.”

Barclays and Lloyds Banking Group have left mass market advice, the Royal Bank of Scotland has significantly scaled back its offering, while Santander’s advisers are currently suspended as it considers whether to scrap investment advice. Nationwide still offers a single-tied advice service through Legal & General and HSBC is offering a restricted advice service.

HSBC head of UK bank and deputy chief executive officer Antonio Simoes said: “One thing I worry about is the number of products no longer offered to the mass market. In the run up to the RDR, the number of UK investment advisers dropped by 12 per cent. The vast majority of the UK market does not have access to investment advice so there is an impact.”

Simoes also warned the cumulative effect of regulation will force UK banks into financial exclusion and push up the cost of services.

He said: “If you think of the RDR, mortgage market review and other new conduct rules, many of these proposals have merits in their own right.

“My concern is that if you add them all together we have a cumulative impact that is too high. It could be bad for competition because if the profitability of the sector is not there then no one will want to invest.”

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. I worked in a bank as an adviser and I 100% disagree with the BBA. banks cannot be trusted to give advice, it is better for the majority of consumers to get no advice rather than poor bank advice.
    RDR is good in that has pushed the banks out of the ‘advice’ space. I strongly suspect that once the claims companies start looking into advised sales of investment products through banks then there will be another huge compensation payout.

  2. John Constable 7th March 2013 at 2:49 pm

    Like a bolt out of the blue, it came to me.

    The final solution for disinfected IFA’s who are at a loose end post-RDR – setup a Claims Management Company (CMC) and not only earn lots of wonga but also get your revenge on the FSA, banassurers and fellow travellers.

    You know it makes sense in an insane world.

    If you can’t beat em, join em.

  3. How funny ! so funny that it would be sad in any other walk of life !!

    What precisely was the BBA (and all the other know all know nothing pro RDR ‘organisations’ / ‘providers’ ) doing prior to RDR coming into force prey tell ?

    I’ll tell you shall I ‘sweet fanny adams’ preaching about all the benefits of the RDR thats what !!!

    Its not as if they and all the others were not warned – and now they are oh so bloody clever.

    On their way to the OFT bleating restriction of trade with all the other clueless experts yet ?? Only a matter of time !!

  4. John Constable 7th March 2013 at 3:27 pm

    Disinfected IFA’s?

    Well, yes, as in no longer tainted by association with the FSA.

    {how to turn a typo into some sort of answer}

  5. Matt Worthington 7th March 2013 at 4:48 pm

    Really this is nothing to do with RDR, and everything to do with profits. Banks have the capital and the firepower and the resources to get through post-RDR times, but rather than accept a short-term dip in their profits they have opted to lose their “valued” customers and their staff.

  6. Anon @ 3.27
    Well done
    kinda makes sense in an insane world

  7. Oh to be disinfected!

    I bet the banks are back on the scene within 18 months!

  8. RDR IS FOR THE BANKS!!!!

    Oh wait…..im about 5 months late on making that call.

    Funny how so many advisers were spouting this rubbish last year when you look at the situation now….

  9. Hampshire Yokel 8th March 2013 at 7:56 am

    Love the disinfected comment, although I’m not sold on the addition of an apostrophe to IFAs.

    The only element of the RDR that (as far as I can see) has materially affected the BBA sector would be the qualifications element.

    I think the bigger push for the exit of these firms from the provision of financial advice, is the poor practices used by them and the bad advice that was provided as a result.

    As suggested by the first comment, it is probably best that the banks exited the advice market and left this to professional advisers working to ethical standards. Unfortunately, the RDR has had a significant impact in this regard and there are fewer professional advisers left to take up the slack.

    In addition, with the abolition of commission for advised sales, it is now difficult for some to make a profit from providing advice.

    Some advice firms will succeed. Others will fail. The net result will be many more consumers left without advice.

    Given the ever expanding savings gap, this is a massive shame. Back in the 1980s and 1990s, I was quite critical of the ‘bicycle clip’ or ‘home service’ companies for delivering poor value. However, they did deliver a service and, at the time, most ordinary families had savings. Run the clock forward a bit and we don’t have the ‘home service’ providers. As a result (and this may be a bit too simplistic), rather than savings, most families now have unsecured debt!

    The first draft of the RDR had its flaws, but it did have the promise of fostering an environment where the old style providers could return. This would have led to more people saving (not less as is the result of the final version) and would have provided the nursery space for the future IFA community.

  10. The crazy think is that the ‘middle market’ [many of those who are expected to fall through the ‘guidance gap] is the most profitable segment of the market by far.
    The banks are exiting because they don;t know how to monetise it.
    The challenge is that many in the advice sector also try and run the old calculation over the current situation and come up with a zero or minus number.
    This is simply because of the inability to have the right engagement conversation with clients that will have them paying fees and getting far better outcomes.
    It means there’s far more left for those who can make it work profitably.

  11. Oh! to be a disinfected IFA!

    Perhaps the solution id
    s offerred in the sama anon post @ 2.49?

    Is there now an opportunity to join this new ‘banassurer’ movement?

    On a serious note, the comments of Hampshire yokel (must be from the New Forest) are spot on.

    Or is that a little hash?

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