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Kim North: Can someone take an overview of regulation

Kim North

Will someone with more influence than I please take a holistic look at what is happening to UK retail financial services?

I have been around financial services for over 30 years and I can’t recall seeing what I consider to be as many negative changes happening at once to the provision of financial services. A few examples follow:

First, Auto enrolment has arrived and 64 per cent of employers according to The Pensions Regulator and BMG Research say they do not intend to pay for financial advice for their employees. We know 2 million people will not invest unless they are advised to do so, I strongly believe there should be an employer obligation to offer advice to employees.

Second, net retail investment sales hit their lowest level since October 2008, with the IMA reporting inflows of just £23.2m for August. Fixed income remained the best-selling asset class, dominating other sectors for the ninth consecutive month. We all know that over the longer term a good selection of equities will outperform fixed interest resulting in less retirement money.

Third, The Nationwide Building Society (others will follow) have scrapped interest-only mortgages for new borrowers making buying a property unaffordable for more people as interest-only is a considerably cheaper than repayment.

In additions, the FSA is about to outline the Financial Conduct Authority’s approach to financial services regulation. This document is expected to reinforce the removal of new business commission. To “get the ball rolling” a CEO letter has been sent to 24 providers and advisers telling them not to offer ‘back door’ commissions such as paying for training, conferences, financial promotions or for IT. The FSA says: “Money from these arrangements would effectively cross-subsidise the cost of advice and could cause firms to recommend certain providers and products over others.”

Where have many financial advisers got most of their training from? Where do advisers network with their peers to learn better client management tips? Who helps adviser clients get a better online experience?

All these have been historically funded by the deep pockets of product providers. Take these three areas away and the advised clients’ experience will reduce and less financial products will be sold as more advisers exit due to their spiralling costs.

The answer to this for advisers is not to give advice as commission post-RDR can be paid for non advised sales. This will result in more inappropriate financial choices.  

Meantime the misguided Money Advice Service wants to work with IFAs to help fill the post-RDR advice gap.

It is about time it increased its IFA referrals which have been as low as 0.3 per cent of all MAS enquirers previously. The MAS says: “We will be having an open consultation where everyone can put forward their view because we don’t have all the answers.”

I do not believe that with its huge budget paid for by us IFAs, the MAS does not know how to deal with IFA referrals. It needs to talk to Unbiased (IFA Promotion) for guidance before they waste even more of our money on a detailed consultation.

My favourite blog which sums up the current situation nicely is “If the FSA was asked to come up with a plan to deal with obesity, the solution would be to ban food”.

Kim North is director of


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. KIm weel said. Now please pass this on to MP’s and get this into the national press so the public can see what is coming in January. I dont think anybody has actually sat down and listed all the detrimental consequences that have been brought about by RDR and those that have yet to be discovered. Please get with it and make as many people aware of this looming disaster as possible

  2. Yes – indeed – well said. I find it incredible that there is so little in terms of joined-up thinking. In relation to workplace pensions for example, the fact that TPR, HMRC, DWP, FSA all have a role and don’t coordinate their approach means we have a mess. With Minister Webb announcing yesterday that we can expect a further consultation paper in a few weeks on “defined ambition” pension plans and that he will continue with his “pot follows member” plan, I see a train wreck ahead.
    I mean, have you tried to advise a client to consolidate a few small pension pots recently? I had one report run to almost two hundred pages after the compliance guys got hold of it! So let’s do it all on an execution only, non-advised basis instead…..that will improve member outcomes….

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