Now the dust has begun to settle on the retail distribution review paper, it is the time for cool heads to put vested interests to one side and consider where this industry sits in broader society.
Despite all the regulatory initiatives of the last 20 years, the UK retail financial services sector has almost entirely ducked and dived from the consumer lobby. From Amazon and Apple through to Easyjet, Ryanair and Zopa, the world has been changing. Sadly, the investment and pension market is stuck in the past.
The research facilities of the internet and demands for transparency mean this situation cannot be maintained for much longer. The days of life offices forcing their wares on an unsuspecting population through a sales-led advisory market are numbered. It has become understood that advisers must be working for providers or working for their clients – it is not possible to do both.
The advisory market has been repolarising for the last three or four years although this time it is down lines drawn by client demand rather than regulatory rules. It seems the RDR presents a potential framework in which the market may complete its evolution.
Much of the post-review jumping up and down has been about the little guy and many commentators and analysts have indicated the FSA is proposing a heavy-handed approach. I may be missing something but this overlooks the fact that almost all the quality IFA firms are small businesses which have been providing very high quality ongoing advice for years. These firms have nothing to fear from the review and can come to expect operational and corporate benefits should the proposals come to pass. In my judgement, those who may be most concerned by the RDR are those who have been masquerading under an independent banner while colluding with the life and pension sector to distribute its products. There has never been true independence in selling for a small group of providers in return for commission. We all know it’s true, now let’s start getting over it.
If the RDR proposals mean the industry takes a couple of steps back before taking several forward to a world in which client-remunerated advisers service those willing to pay for that service and the mass-market self-serves or is sold products by big institutions such as banks, asset management groups or life offices, the pain will be a price worth paying. At least consumers will know where they stand and who they have recourse to should it go wrong.
David Ferguson is chief executive of Nucleus.