Last month, the Association of Professional Financial Advisers called on the FCA for a regulatory dividend for advisers. One thing that is clear about the impact of the RDR so far is the reduction in the numbers of advisers.
FCA figures show there were 26,000 advisers before the RDR, compared with about 21,000 now. There has been a slight pick-up as some more passed their final exams but, overall, this is still a significant fall.
Apfa is not alone in its concern about the impact of the RDR on consumers seeking advice. The point was acknowledged by Martin Wheatley in his appearance before the Treasury select committee in September.
This is vital at a time when Government policy on pensions and long-term care is placing an emphasis on people making their own provision for financial well-being.
As we see it, the sector needs to rebuild itself and the regulatory environment should be more conducive to advisers running their businesses.
We are not suggesting lowering standards but helping firms grow, develop talent and encourage more young people to join the profession.
In light of its new competition objective, we think the FCA should share these aims. It must recognise that a healthy number of advisers is good for consumers and that there are things it could do to help deliver this.
There are several things the FCA could do to help reduce the regulatory burden on adviser firms. These include:
- Reporting requirements – Streamline the data it collects from advisers and increase time to report from six weeks to three months.
- Consumer credit – Ensure the regulation of firms where consumer credit is incidental to their main business, such as advisers, is proportionate to the risks they present. For example, advisers whose clients pay in instalments do not pose the same risks as payday lenders.
- Longstop – The FSA gave a commitment to Parliament that the FCA would consider whether to investigate the case for a longstop as part of its business planning for 2014/15. We want the FCA to make good on this commitment and look again at the issue of a longstop for advisers.
- FSCS threshold for investment intermediaries – The FSA’s case for increasing the FSCS threshold assumed that the revenues, and therefore profits, of the advice sector will not fall below 2010/11 levels following the implementation of the RDR. In light of the reduction in the number of advisers, this decision should be reversed if revenues and profits do fall.
- Fees – We believe that following the RDR, the reduced risks to consumers means less regulatory resource is needed to supervise advice firms. The FCA should look again at the way it allocates costs to advisers and reduce their share of the bill.
However, we do not think we have identified all the things that make life difficult for advisers. This is not an exhaustive list and we are interested in the issues or problems you have had.
If you have any suggestions for changes, we’d like to hear from you at firstname.lastname@example.org.
Chris Hannant is director general at the Association of Professional Financial Advisers