Two years ago, I listened to Lord Turner talking about the golden opportunity for the FSA to escape groundhog day through financial capability, treating customers fairly and financial education in schools while rebuilding consumer trust.
I remember Harry Katz, one of the most insightful IFAs, pointing out that pushing on with the retail distribution review reminded him of Nero fiddling while Rome burned.
Having read the FSA’s latest RDR update, I have had time to ponder on what I have seen and it is hard to disagree with Harry two years later.
I think it is a good thing the independent and restricted adviser title has remained for the consumer as it is clear and is understood. But will bank customers understand the difference between restricted and independent advice when the RDR is now saying it is not necessary to specifically inform a client receiving restricted advice that independent advice is also available? As for the restricted adviser not being forced to use mandated wording for the restricted advice and allowed to orally explain the nature of the restricted advice from a script (which will vary from one restricted adviser to another) – how can this increase customer capability and rebuild consumer trust?
The customer will walk out of a financial planning meeting with no idea that the adviser is only able to recommend a handful of products which suit their needs while an IFA can recommend from over 30,000 financial products? Please, FSA, introduce mandatory disclosure wording for restricted advisers and do not rely on mystery shopping to check all is being disclosed properly.
The FSA has been criticised for dealing with past misselling problems and not doing enough to prevent future misselling. If selling simplified products through restricted financial advice to those who do not need independent advice helps the banks repay some of the debt they owe, then so be it. This is another golden opportunity for over-thecounter bank financial advice but the banks have been given many opportunities to unleash their powerful brands and dominate the distribution of financial services. Yet, they never have and I do not think in my lifetime they ever will.
The latest RDR paper talks about concerns over lowering the qualification level for simplified advice. It is commonly agreed that IFAs should push on to QCF level four and many already have. According to IFA Promotion, at the end of March, 15,686 verified QCF level four (or above) qualifications were held by member IFAs. Individual IFAs also record holding 11,443 verified QCF level three qualifications in addition to the current benchmark and the increasing number of IFAs obtaining these qualifications is faster than ever before.
Many will share the FSA’s concern about the potential for consumer confusion if providers of simplified advice are able to operate at a lower professional level to the broader advice market. It will be confusing enough for consumers to understand the implications of restricted and simplified advice never mind the level of qualification the advisers have.
Kim North (kim@techandtech. co.uk) is director of Technology & Technical