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FCA must work with advisers after finally admitting to gap

Advisers are calling on the FCA to work with the industry to close the advice gap after chief executive Martin Wheatley finally admitted the RDR was damaging access to advice.

Appearing before the Treasury select committee this week, Wheatley raised concerns over the withdrawal of banks and insurers from the mass market advice space post-RDR.

He told MPs: “It is a concern that people with portfolios below £50,000 or £100,000 are not getting the same service they were getting. That is a concern.

“There are some issues with the withdrawal of mass market providers. You can question how much was advice before or just sales dressed up as advice, but nonetheless people below a certain portfolio have less access.”

FCA figures, published last month, show adviser numbers have dropped 15 per cent from 25,616 in December 2011 to 21,684 in July 2013. Bank adviser numbers are down 47 per cent, from 8,658 to 4,604.

Apfa director general Chris Hannant says the trade body is in talks with the FCA to make it easier to run adviser firms post-RDR and as a result pave the way to closing the advice gap. 

Hannant says: “There are a number of difficulties of doing business with the regulator, such as fees and reporting standards, which could be changed to make it easier to run an adviser firm. 

“If it is easier to run a business and the costs are lower, it is therefore cheaper to provide advice and more firms could enter the market and help fill the advice gap.”

A British Bankers’ Association spokeswoman says: “Further work is required to address the advice gap as we do not believe the needs of customers with less than £50,000 to invest will be met via non-advised and execution-only services alone.”

Lansons director of regulatory consulting Richard Hobbs says: “The FSA was repeatedly told the RDR had a strong exclusionary effect at the bottom end of the market but ignored it.”

Conservative peer Lord Robin Hodgson, who has campaigned over the advice gap, says: “This is closing the stable door after the horse has bolted.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Finally some sense, it doesn’t matter which industry you work, the best way to find out whether something will be successful is to ask the troops on the ground, they usually have their ear to the ground with the people that need advice the most, clients with lots of money have a need for advice but people who work really hard for their money and where every penny counts they really have a need for advice and as usual its these guys that are being penalised as they generally cannot afford to pay for it, a lot of my friends from the industry have left now and took up other jobs, the providers were saying this was great as it leaves more customers for the advisers who are left, well there are less customers because if you can’t earn any money they won’t receive any advice and the bottle neck at the top is being squeezed as more advisers are chasing the few people with money, I have been asked by some clients to enter a bidding war to buy business in, I know 1-2 advisers who are working for free to try and gain extra clients, they will be bankrupt soon, what I would like to see is the return of commission for pots under £100,000 creating a huge market for Joe public clients

  2. I can’t say I am very happy with the comment “There are some issues with the withdrawal of mass market providers.” Not terribly concerned about all the small advisers that have gone out of business then Mr Wheatley?

    I would like to say I am sorry that I have to bother logging in to MM to leave a comment now, with the dozens of passwords advisers have to remember. I hope it doesn’t put too many people off leaving their views.

  3. I will always remember a Two Ronnies sketch when the specialised subject for Ronnie Barker was the ‘Bleedin’ Obvious’. Now I reckon that the so-called ‘unintended consequences’ of the RDR were bleedin’ obvious to the vast majority of the industry, including the advice gap, which we talked about in our business last year and which we warned our own MP, Mark Lancaster about, and who which really showed that if anybody couldn’t give a damn about it then it was him. The regulator thought that RDR would mean a fairer choice for the consumer and that the cost of advice would come down as adviser firms competed with each other, yet we all knew that costs would go up due to regulatory pressures and that there would be no real competition as the amount of potential ‘orphan’ clients increased as the adviser numbers decreased. RDR went far too far in a short period of time and quite frankly things will get worse and not better. Well done Wheatley and Sants, especially the latter who in my view is the most underserving and hypocritical individual I have heard of. He deserves his knighthood as much as Fred the Shred did.

  4. The burden of compliance has now become so incredibly (as in beyond credibility) onerous that it’s almost impossible to advise on something as simple as transferring the value of an XYZ Life PP to its cheaper and better XYZ Unit Trust/OEIC platform counterpart. As a WoM independent, the entire exercise must be treated as “replacement business”, subject to a full market analysis and everything that goes with it, which are monumentally time-consuming and therefore cost so much as to negate the viability of the entire exercise. So what happens? The intermediary does nothing (can’t afford to do anything), whilst the FSA is intent on banning servicing commission from the existing contract. The client remains in an inferior contract and the intermediary will have to bill him for any future reviews. How’s that supposed to be of any benefit to anybody? It’s the exact opposite.

    The FSA claims it wants to see “better consumer outcomes” yet, by imposing excessive regulatory requirements, makes it impossible for clients to be moved to a newer, better and cheaper contract with built-in adviser charging. Is this what the RDR was intended to achieve? Does the FSA recognise that this needs to be addressed?

  5. I read somewhere or other today that Martin Wheatley thinks the advice gap can be plugged by online DIY sites. Just log on, read a few paragraphs of generic guidance and hey, presto, all your uncertainties will be solved. It seems the FCA will come up with any alternative to allowing some respite for over-burdened IFA’s.

  6. Someone hit the nail on the head in a comment last week. One of the problems that we face as advisers, is the backlash from any complaints, especially spurious ones from many CMCs’. As a result of the time required to defend and administer such matters, even where the complaint is unfounded, we now have to review the types of business we conduct and the area of the market we operate in.

    As many advisers don’t conduct volume business, there cannot be a percentages game (not that we would want one). Therefore, if CMCs’ and regulatory costs and overload continue to operate in the way in which they do, with advisers having liabilities which extend way beyond the level of remuneration which they receive per piece of business, then it is difficult to see how lower level business can ever get a look in on a properly advised basis.

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