A couple of weeks ago, Money Marketing reported on some of the findings of the Investment Management Association’s annual asset management survey. A weighty tome of over 100 pages was neatly condensed into just over 300 words. The article highlighted the level of worry among fund managers about the regulatory environment and in particular the danger posed by the unintended consequences of rapid regulatory change in the UK.
There was one piece of regulation not covered by the article (perhaps because it has been done to death) but maybe because it can hardly be said to have been rapid – and that was the retail distribution review.
Let me say from the outset that the asset management industry supports the broad aims of the RDR. As an industry which depends on its distributors, we have a keen interest in IFAs providing a good service which offers value for money to consumers – as indeed the great majority do – and in particular a world free of commission bias.
But does the RDR deliver? Yes, the proposed adviser charging solution will give consumers more control over commission payments but it does have limitations, not least the difference between the ease with which the fund and life industries can each facilitate adviser charging.
As the final shape of the RDR has yet to be determined, there remain a number of questions. Will financial advice become more and more of an elitist service? Most people in the industry believe that low to middle-income groups – not traditionally the natural customers of paid for advice at the best of times – will simply see financial advice as even more remote from them once the RDR is in place. And this is all the more worrying when it is this group of people which arguably needs, and would benefit most from, financial advice.
What will the landscape look like for those who do seek advice? Some in the industry believe that there will be more concentration on packaged products, where a number of decisions have already been made for the consumer. So, instead of the consumer and the adviser doing the work to ascertain the appropriate asset allocation, there may be more pre-packaged products which have already been designated as suitable for particular profiles.
These have been described as “portfolios with in-built advice”, where the portfolio is “managed for its outcome rather than its content”. And this is where asset managers can potentially play a more active role in coming up with multi-asset and solution-based products.
Finally, how can advisers and the industry collectively deliver the required amount of advice and guidance in a post-RDR world? Both will have to work together to ensure that consumers have access to the advice and information they need so as to access the right products for their own needs.
It was even suggested by one of those we interviewed that most people do not need advice and ordinary people without complex financial circumstances and investing over the long term can do so using internet-based guidance. Will the RDR create this brave new world?
Mona Patel is head of communications at the Investment Management Association