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FSA delays RDR paper due to TSC consultation

The FSA has delayed publication of its RDR professionalism policy statement, due this month.

In November, the Treasury select committee launched a consultation on the RDR and is seeking written evidence on whether the RDR will achieve its stated outcomes.

The FSA says it wants to ensure it has an opportunity to provide the Treasury select committee with a “comprehensive rationale about why it remains committed to delivering the RDR”.

The FSA says it plans to publish final rules and a policy statement in January 2011 and “remains fully committed” to implementing the RDR in January 2013.

In a letter to committee chairman Andrew Tyrie dated December 13, FSA chief executive Hector Sants set out why the regulator remains committed to the RDR.

Sants writes that problems with mis-selling scandals and a lack of consumer trust continue to exist in the advice market and that fundamental changes are needed to address these issues.

The FSA estimates the average cost of annual consumer detriment caused by unsuitable product sales to be between £400m and £600m.

Sants says the RDR will ensure customers get good quality advice, products and services suited to their needs from advisers displaying higher standards of professionalism and expertise.

He adds the regulator does not agree with the argument that the RDR will threaten the availability of good quality advice.

Sants says: “Any dilution of the proposals will result in an increase in the cost to consumers through continued mis-selling.

“Despite the vocal concerns of some in the IFA community, we believe the RDR is absolutely fundamental to address the root causes of numerous problems we have observed in this sector and to improve consumer outcomes.”


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There are 30 comments at the moment, we would love to hear your opinion too.

  1. This remains a massive experiment with other peoples livelihoods.

  2. Do the FSA really know what they are doing? Perhaps, they are looking at themselves and wondering if they are ready of the implementation of the RDR.

  3. I would like to see Hector Sants evidence on all this particularly as relevant to the independent sector.

  4. Well, planet sants is alive and well.

    Sants writes that problems with mis-selling scandals and a lack of consumer trust continue to exist in the advice market and that fundamental changes are needed to address these issues.

    Yes Mr Sants – the BANKS are where you need to be looking. 60% of claims against 2% claims IFAs. Get a grip!

  5. The FSA says it wants to ensure it has an opportunity to provide the Treasury select committee with a “comprehensive rationale about why it remains committed to delivering the RDR”.

    Surely this would have been done BEFORE they progressed so far?

    The FSA believe extra qualifications and the ban on commission will prevent miss-selling scandals – you must be living in another world!

    I’ve said it before, MAXIMISE commssions on all regulated products. Reduce the BLURB in Key Features Docs, standardise Fact Finds, standardise Research requirements and have all suitability reports SIGNED by clients.

    Too simple for the FSA to impose?

  6. Most IFA’s who do not miss-sell products would be glad of greater personal accountability and this is where the focus should be set. Getting rid of poor advisors will benefit everyone but a sniper approach is required, based on fact and not fiction. If the FSA can prove RDR will do this why not simply give evidence to this point? This being the case they will undoubtedly encounter far less resistance and dare I say support from the IFA community. As it is the FSA have put back amendments to approved persons regime and continue to neglect to clarify reasoning for their stance. Based on the published complaints data they continue to alienate the IFA community and show huge bias towards direct sales models. Mr Sants should abandon his God Syndrome approach as RDR and MMR in current form continues to fail, if in no other way a by lack of clarity. Consultation should be a two way street and such defensive attitudes makes a mockery of this process.

  7. Mr clever Sants, even if it were £600 million do away with the FSA and the cost of the FSCS and FOS, give the money to the courts and have a simplfied court system for claims to be made in accordance with the laws of the land and the human rights act.


  8. What are the FSA saying? That the average loss per person is between £400m and £600m, which is absurd, or the loss per annum, spread over the total advisor population is between £400m and £600m. As the FSA do not provide background figures let us assume there are 30,000 advisers each with 150 clients. Using the top line figure of £600m indicates an average personal loss of £133. They could lose more than that on a bad day on the Stockmarket – or it could be the cost of an hours advice.
    In fact it probably costs a client that much annually in the redistributed costs of the FSA.
    This is creating rules by distortion – think of the biggest figure you can get away with and flog it to the gullible press.

    Then lets move on to the other distortion. Sants implies that consumer do not get good quality advice, products and services at the moment. Firstly there is little hard evidence about the overall quality of advice; merely stories. Secondly, Advisers do not provide products ( and all the available evidence suggests that the products they use are market best). Thirdly, what does he mean by services, e.g. the appalling administration provided by insurance companies? Why lump that on advisers, when the FSA have always turned a blind eye to improving the quality of Insurance and Investment Company administration.

    Mr Sants should further consider the various reasons for the alleged low consumer confidence. If the industry regulator is constantly shooting that the advice is poor, then the public are likely to believe them. In which case any change of regulatory pattern is not going to improve that perception. On the other hand shutting up will improve general confidence, it costs nothing, and lets everyone concentrate on improving a reasonably good industry. Its the “give a dog a bad name” syndrome – yet there is precious little hard evidence that the advisory sector is seriously flawed. It can be improved, but then so could every industry I can think of. And so could the FSA.

    And to maintain that the RDR does not threaten the availability of good advice is pure ostrichism. The availability of any level of financial advice has already been removed from whole layers of society; adding yet more costs onto the advice process is not going to reverse that trend.

    If this is the intellect that is now going to take over macro-regulation of the British Economy I am tempted to pack my bags and go now.

  9. No doubt they are “sexing up” the dossier as we speak

  10. “The numerous problems we have observed in this sector”, as stated by Mr Sants.

    It’s good to know that after goodness knows how many years of walking around (not running) like headless chickens, completely unaware of what was going on around them, it has been ‘observed’ that there are numerous problems in the sector!
    Although there is no way to be sure that you are looking at the right part of the sector, Hector!
    With the FSA’s track record I would think that is the very last organisation that should try to fix the problem.
    The FSA is not fit for purpose. Let it die quietly, and not be allowed to leave one more major cock up for everyone else to sort out, as they have been doing since inception.

    However, with the same person charged with running its replacement, eveything should be just fine and dandy in future.
    Heaven help us!!!!!!!!!!!!!

  11. “The FSA estimates the average cost of annual consumer detriment caused by unsuitable product sales to be between £400m and £600m”
    Can hector give us a breakdown of who sold those unsuitable products?
    The cost of the RDR is estimated at 1.7 BILLION.Talk about a sledgehammer to crack a nut.

  12. Think we just have to face it since 1988 we have been under a dictatorship!!!
    No one has had the opportunity to change matters.
    I did a structured product for a client today and the key features was 46 pages long.
    The FSA have made our industry far too complex for clients.
    I always wonder with the costs of compliance for clients as ultimately they pay for it, has regulation really worked?.
    22 years onwards and they have still not got it sorted out.
    They make out it is the advisors that need this brought in???. Think they should be the company that needs change.
    I agree with the level 4 exams as an experienced advisor should have no problems getting through it.

  13. “Numerous problems”, “mis-selling” these are perceptions – look at who set up the rules and regulations in tablets of stone e.g. endowments, pension opt outs etc……………………… I perceive where the “problems” and “mis-selling” eminated from in the first place!
    The “scandal”, on endowments for instance, was that other investors had to pay from other funds to compensate undeserving cases! The current scandal is exaggeration by persons with an alterior motive and unjustified discrimination against valued and already professional members of this industry! Please, just take a look at yourselves?

  14. £600 million (even if accurate) is a lot less than the billions given to nationalise the banks because of the tens of billions they lost.

    That surely was to consumer detriment on a much larger scale yet the FSA recently said RBS was not at fault at all and just made a bad business decision.

    Now we hear that IFA’s aren’t allowed to make bad business decisions for much smaller amounts.

    Explain please.

  15. “The FSA estimates that the average annual consumer detriment caused by unsuitable product sales to be between £400m and £600m”
    Of which over 90% is down to the Banksters.

    Compared to the cost of the FSA at £600 + million a year or more and £100 million a year to run the FOS some may question the balance of effectiveness of these institutions.

  16. Mr Sant says…The FSA estimates the average cost of annual consumer detriment caused by unsuitable product sales to be between £400m and £600m.

    The COST of RDR is £1.6 Billion to be paid for by CONSUMERS… save £400 To £600m consumer detriment……….you coud not make it up!!!. Makes it a pleasure to pay £12000pa to these clowns……NOT

  17. Hello anyone there at the FSA
    “Mis-selling scandals and lack of customer care”
    Come on Sants how long are going to keep churning up this old chestnut.
    Short memory hey! only last year it was reported that “That the FSA was not fit for purpose
    Need to keep yourself in a job before you take on your next demolition job at the BOE

  18. The fsa are incompetent nutchuggers

  19. Mr Sants,not only do you spout utter rubbish but you are now being sly and furtive with it.

  20. The annual detriment is £500m. The cost of the FSA is £500m. OK. So we got the Financial Crisis for Free.
    The cure has become worse than the disease.

  21. So the whole rationale is consumer detriment of 400million per yr?. Hmmmm.
    If every adviser (assume 30,000) spends just ONE hour per year per client (assume 150 clients per adviser) on regulatory driven additional work that the client doesnt require, at an avge adviser rate of say £100 per hour, that costs consumers…… £450 million per yr!!

  22. How much of this alleged £400 million is a result of poor or ineffective regulation then Mr Sants?

    Keydata was whose fault, or Crown Currency Exchange (sorry not within your remit was CCE) ?

    Oh by the way what do we pay you for and how well have you all performed in protecting the consumer over the last decade?

    Did you miss our worst financial crisis in nearly 70 years or the odd bank and financial institution being saved by the good old tax-payer because someone did not have their eye on the ball when protecting the consumer?

    Still not to worry as you are all protected from any wrong-doing under FSMA 2000, how convenient is that?

    Now you have even more highly paid staff than ever, what a wonderful “unaccountable” and perfect world you must all live in?

    Not so perfect for the rest of us though as we pay for your perfect world, big time,

  23. Fraser Brydon - IFA 16th December 2010 at 9:39 am

    The sheer arogance of the man is beyond belief, to delay means more people will be mis-sold ergo apply RDR as propossed and all will be fine, a magic wand for the banks then, either brilliant planning or the man is a comlete fool….

  24. “Consumer detriment between £400M and £600M” That seems like a very wide margin. How do we know how accurate this is? I think that if it were me I would only want to act based upon a far more detailed and precise figure. But then I am not a Regulator……

  25. Is there a QCF Level 4 or higher in Regulation? If not, why not? The FSA makes cockups all the time at other peoples’ expense but no one at Canary Wharf ever seems to be held to account. In fact, if you’re sufficiently senior and your failure is so high profile as to be impossible to paper over, you get gently eased out with a £612,000 pay off, whereafter you could afford never to work again if you so chose. All other peoples’ money, of course.

    Yet the small IFA knows he has to get things right for his clients, year in, year out, otherwise he’ll be out of business as a result of either clients defecting to rival firms or the weight of PII excesses that he’s having to stump up in respect of complaints that go against him.

    In spite of all that, the FSA’s focus is disproportionately concentrated on the IFA sector, whilst the banks continue to get away with practices over which the FSA would be down on an IFA firm like a hundred tons of hot bricks. What happened about Barclays having mass-missold all and sundry into the Aviva Global Managed fund, compounded by the totally anti-TCF way in which it handled almost all the complaints that arose? Nothing from the FSA ~ the victims had to march on Parliament to demand justice. Barclays hasn’t even been publicly censured.

    If you look hard enough after the event at just about any advice you can find holes to pick in it. The main problem, though, is that the FSA is told by the Treasury to turn a blind eye to where everyone knows the worst practices are being perpetrated, day in and day out. So the whole playing field is tilted and skewed as a result of strings being pulled behind the scenes. The whole thing stinks.

  26. Oh Hector, this is the season of goodwill

    But you really have lost the plot, provide some evidence.

    Oh by the way, could you do me a favour and ask the FOS to get up to speed. Client has been waiting 2 years for a decision regarding a bad advise from a bank that lost him £60,000.

    Apparently they have so many complaints about this bank they just can’t sort it out.

  27. RDR IS A PAPER TIGER 18th December 2010 at 12:12 pm

    RDR is a Paper Tiger – when challenged it folds.
    Has anyone noticed that the FSA arguments are increasingly irrational? The figures that Sants quotes need to be looked at. Only recently Sant presents an Australian study of just three financial advisers as justification for his commission ban. Sants now seems concerned at consumer cost and yet
    Oxera, the market research firm employed by the FSA to assess the costs and benefits of the changes, expects the net present value of the RDR compliance costs to the industry to reach between £1.4 billion and £1.7 billion. Worryingly, the estimate in 2008 was £600 million, so do we now accept Sant’s latest guess? That cost will be passed directly to consumers. The latest estimate represents an astonishing 180% increase. Oxera expects the increase in compliance costs to be passed on to consumers, so they will pay for the changes. Charges will be higher, so sales of financial products will decline. The majority of adviser firms expect a reduction in turnover. Consumers with smaller amounts to invest are much less likely to seek advice if they have to pay for it explicitly. Smaller firms of IFAs are the most likely to exit the market.

  28. It is riduclous to link the non implementation of RDR with additional consumer costs due to misselling. The FSA is just trying to scare people with the ‘bogeyman’. With all the best intentions RDR does nothing to address the issue of miselling. The fundamental problem with miselling lies with the way in which the banks renumerate and target their staff. It is time to change the whole structure of Bank staff renumeration not the way in which the public are charged. You can train them as much as you like, but if their livlihoods depend on them hitting a target they will fiddle any way they can to reach them. They know they won’t be around long enough to deal with the consequences not will their managers who turn a blind eye as long as the results come in. I know I worked in bancassurance for several banks and believe me they are all the same.

  29. ..and exactly how many financial profession relevant qualifications do they have at the FSA put together (Clue: you can’t count CSE maths).

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