With less than 500 days to go to the retail distribution review, we are now getting to the nitty gritty of what the future for financial advice may look like.
Will the introduction of the RDR be delayed as recommended by the Treasury select committee? I think not, as we have all had long enough to prepare and still have the whole of 2012 to sit exams, raise standards and introduce advisercharging to clients.
Research shows consumers like the idea of the RDR. The Chartered Insurance Institute reports that in the population at large, there could be a 66 per cent increase in the number of people receiving financial advice, which could lead to 11 million more adults considering financial advice who are not doing so already as a result of an RDR information campaign.
I find this a little hard to believe, however. Recent activity means consumers are going to be more confused than ever about their financial advice options. The Money Advice Service does not provide any advice, restricted advice sounds like a negative offering and it is unfair that it is not necessary to specifically inform a client receiving restricted advice that independent advice is also available.
As for restricted advisers being allowed to use their own wording to orally explain the nature of restricted advice, rather than being required to use a compulsory script, how can this increase customer capability and rebuild consumer trust?
The FSA is probably surprised at the big banks’ recent distribution decisions, given it may have thought of the RDR as a golden opportunity for the banks to sell simplified products through restricted financial advisers and dominate the distribution of financial services.
But, as I predicted in previous commentaries, Barclays has pulled out of providing financial advice at its branches, the Co-operative has axed 670 door-to-door sales staff and HSBC is cutting 460 financial planning managers across the UK.
This withdrawal by the big banks is good news for all financial advisers still in business. It appears IFA numbers may remain level, with Aviva’s research showing the number of IFAs intending to leave the industry before the RDR has fallen from 36 per cent in January 2009 to 7 per cent in June 2011.
The sooner we have a trade body for all financial advisers the better, as the FSA is set to morph into the Financial Conduct Authority and we are faced with increased European regulation. The difficult decision by Aifa to accept restricted advisers is an inevitable commercial decision in these austere times.
Now the decision is made, it is a shame that St James’s Place, which has assets under management of £29.1bn and a clever marketing strategy, has come out so quickly to say it has no plans to join Aifa.
We need a united lobbying effort funded by and for the benefit of all financial advisers to try to make the provision of financial advice attractive to consumers, ensure it is a sensible career choice and lobby the regulations to ensure the provision of financial advice is not rendered non-profitable.
Kim North is managing director of Technology & Technical