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MM leader: Thinking the unthinkable on advice reform

Natalie Holt, journalist with Money Marketing Photo by Michael Walter/Troika

Driving professionalism through higher qualification standards and ridding advice of commission bias were the two central tenets of the RDR. So after all the years of agonising and hand wringing involved in rolling out the reforms it sounds absurd, perhaps unthinkable, that we are in for another round of overhauling the advice market in the shape of the Financial Advice Market Review. What, arguably, is even more unthinkable is that those overarching RDR principles could be unravelled in any way.

Yet this is the position the advice profession finds itself in. Money Marketing understands, although talks are at an early stage, that options being considered by the advice review expert panel range from lower qualification standards for certain products and curbs on the sale of unregulated products to bringing back some form of commission.

Instinctively it feels wrong to row back on one of the biggest change programmes the advice market has ever seen, given the blood, sweat and tears it took to get here.

But the RDR has not been without its critics (something of an understatement), and there are those within in the industry who are starting to question whether rewriting the reforms is really that crazy after all.

It is no mean feat the FAMR panel have been tasked with: dream up ways to plug the advice gap for less wealthy consumers and, in the consultation’s words: “give firms the regulatory clarity and create the right environment for them to innovate and grow”.

When faced with such a challenge, and the ambitious timescale to deliver its findings before the Budget, it is no wonder the panel has been pushed to consider yet another radical overhaul.

The argument about creating an advice framework that sits separate to but alongside the RDR has been run and re-run, through basic advice, simplified advice, simple products, guidance, etc. Banks and providers have constantly been trying to chip away at this idea that advice is always fully regulated and therefore must comply with QCF Level 4, with transparent charging structures to boot.

The sticking points that proved the ultimate roadblock with simplified advice remain the same – what consumer protection is afforded for pared down advice, and what are the liabilities for the firms that offer such a service.

Yet at a time when banks, insurers and fund groups seem to have the ear of the Government and the FCA, it seems their pleas to relent on certain aspects of the RDR may finally start to gain traction.

Natalie Holt is editor of Money Marketing – follow her on Twitter here



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There are 9 comments at the moment, we would love to hear your opinion too.

  1. Natalie

    It IS unthinkable – so don’t think it, let alone have it come to pass.

  2. Can someone please tell me…where does this advice gap exist?
    Mortgages – still pay commission
    Life insurance – still pays commission
    Pensions – TPAS and Pensions Wise and MAS exist for a reason
    Investments – presumably if someone can’t aford to pay for advice they also can’t afford any risk of loss with their savings.

    So when we hear about the “advice gap” – what products and advice are these people looking for?

  3. A cynic might be left to conclude that money talks and that the banks have most of it…. because they can make it out of thin air.

    That said, qualifications ought to suit the advise area, there needs to be a clear distinction between financial planning (best term is holistic) and “advice” to arrange products. Clearly the independent/restricted issue is a mess. The real issue for how advisers are paid is not whether its commission or fee, but is is genuninely declared, transparent and irrelevant of provider “marketing allowance”…. commission for protection isn’t a bad way to help those that need cover (by definition, lacking resources) to pay for it….

    However, babies and bathwater…

    • Yes this is the daft thing about the whole commission or fee debate: as long as the client knows what they are paying and the adviser doesn’t have an incentive to choose Provider A over Provider B due to higher commission, there is no difference.

  4. This is exactly the type of thinking that reduces the industry to ‘double glazing’ standards. (Apologies to good double glazing sales people.)
    How about this for an idea, every IFA individual takes on one ‘advice gap’ client per month and gives them a ‘special deal’ for a full advice service, for say 1% establishment fee (by fund or cheque) & 0.5% ongoing, if appropriate. This is to cover all aspects of Financial content and it may be that we say put it into the best bank/bs account you can find etc.

  5. I considered a reversal of my vasectomy at one point, but decided it would be too painful. I think I’d rather reverse that than the RDR, not because of the outcome, but because of the pain to get there.

  6. Forget the ‘journey’ from sanity into madness. If the RDR provisions were wrong and thwart the attempts to bridge the advice gaps then back-peddle.

    It takes a big man to admit he’s wrong. Are there any at E14?

    • But they’ll never admit they were wrong, just as they never appolgise if they get anything wrong. I was told even if I got an apology from them about another issue, if I made it public I might need to take legal advice over publishing it! Needless to say I have a recording of the conversation backed up off site as well on on server.

  7. Douglas Baillie 7th January 2016 at 5:53 pm

    A recent FOS adjudicator decided that the adviser’s advice was unsuitable because the adviser would get paid by the product provider, and was therefore biased.

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