The financial services industry is in a great hole with RDR and it is time to stop digging.
We are six months before implementation and My Touchstone, which maps RDR developments, says only 5 per cent of IFAs are ready. Aifa says 75 per cent. So who do we believe?
The FSA never did a proper RDR impact assessment because if it had it would have been stillborn. It became a virility symbol for Hector Sants who was prepared to trample on the UK’s most senior select committee to get his way. It has also been a very useful diversion from the FSA’s handling of the banking crisis and its unwillingness to regulate those “too big to fail”.
In March 2010, the FSA Board gave considerable thought to scrapping the RDR but continued fearful of losing face. It has been this rather oriental management fear that has driven the RDR on. We cannot disenfranchise millions of IFA advised clients, push thousands on to the unemployment register and turn advice into a luxury for the rich; so a failed regulator and its failed boss can save face. It is time for whoever still exists at the FSA to call a halt on this bizarre social experiment.
Who is tracking the movement of advisers towards the qualification? Estimates range from 5 per cent to 80 per cent ready – both cannot be right. What happens to the 90 per cent qualified adviser in December? We know that exam failure rates are higher than expected, which may speak more to the reported impractical nature of the syllabus, than the abilities of advisers. Retakes are the order of the day.
Much of the confusion derives from the way RDR has been developed on the hoof. We do not know whether 1m or 10m clients will no longer have a live adviser. Gap filling has been a mess. Can anyone explain simplified advice? RDR is missing its central planks and its original cheerleaders. The banks that started lobbying for RDR like crazy, have woken up to the fact that even they cannot deliver it.
What happens at the product providers when a minimum of 1,500 advisers, it could easily be 5,000 or more, all want to novate their agencies in December – 5m plus policies on the move in a 2 week month.
It is time to stop and rethink. We are told we have a new regulator and new EU directive. Unless FCA is simply a rebadged FSA, should it not look at this project and decide its own policy and ensure we only have one well planned change which works across Europe rather than 5 years of constant change?
Mifid II will decide if commission will still exist in Europe. If it does; RDR will fail.
In the meantime all those who have passed level 4 can promote their new found knowledge to their clients. The rest get more time. The movement from commission to fee charging will continue decided by clients not regulators – the way it should be.
This child of vested interest needs to be put back in the nursery before it does any more damage.
Life Change managing director Garry Heath