Even as an ardent supporter of the RDR, the latest cost revelations from the FSA via Money Marketing are beyond outrageous.
For a relatively simple set of industry improvements to cost an eye-watering £2.6bn over a period of five years is enough to make George Osborne weep. We are supposed to be living in an age of austerity. Clearly nobody told the regulator.
Some of the one-off and ongoing costs attributed to the RDR as reported by Money Marketing last week are baffling.
I suspect such high costs were the result of firms, particularly large product providers, being dragged kicking and screaming into the new world. It costs the equivalent of the GDP of Montenegro to bring your legacy systems up to scratch if you’ve been living in the past until the last possible moment.
The whole regulatory system of retail financial services in the UK has become massively over-engineered. We’ve arrived at a place where we are regulated from too many directions.
No man can serve two masters, yet as regulated firms and individuals we are forced to now serve many masters.
In addition to the FSA, we are at the mercy of the FOS and its often bizarre decisions, the FSCS and its massive levies, and most recently our professional bodies with responsibility for Statements of Professional Standing.
Rather than a simple and effective system of regulation with clear rules, we have a convoluted hotchpotch where more time can be spent documenting, reporting and complying than actually delivering an excellent service to clients. It’s a rather sad state of affairs.
I have suggested before that there must be a better way. A self-regulatory body could (and should) have been formed at the time when our professional bodies accepted responsibility for approving and monitoring the professional standards of individual advisers.
Instead, we have been left with a situation where individuals are effectively regulated by a combination of the FSA and their chosen professional body.
In all of this, the consumer pays. That £2.6bn of RDR costs is coming directly (well, indirectly actually) out of the pockets of consumers. Whilst I have no doubt that the RDR will eventually result in better advice outcomes for consumers, it will come at a significantly higher cost than was originally predicted.
When our next FSCS interim levy lands on the doormat this month, our clients pay for that as well. With remuneration transparency now de rigueur in retail financial services, the cost of the failure of others will be stark for consumers.
Our peers do silly things like recommend investment in Caribbean property developments and all financial services customers pay a heavy price.
We might not be able to form a single industry voice on most issues; I’m betting it won’t be long before financial services consumers manage to do so, lobbying the FSA and Parliament to cut the complexity, cost and general craziness of financial services regulation.
That might be wishful thinking on my part. Perhaps regulated firms are as much to blame for the current mess as the regulators. Nothing as simple as proper qualification standards and transparent remuneration should have cost anywhere close to £2.6bn. We should all have been there years before the FSA originally suggested it.
Martin Bamford is managing director of Informed Choice