It must however address its biggest gap – reduced access to advice in the middle market.
Since the publication of the RDR Consultation Paper in June, I have become increasingly concerned at the volume of commentators inviting us to challenge its merits. Recent concerns have focused on the potential ramifications of the Conservative Party’s apparent ambivalence to the RDR.
Yes, an election looms on the horizon and opposition parties are beginning to outline proposals for the financial services industry. But over-zealous reports on the impact of a change in government on the RDR risk diverting attention from the key issue – providing consumers with clarity, simplicity and confidence.
Recent research from AXA Winterthur highlighted a consumer confidence crisis and a lack of faith in the Government and the Bank of England to dig Britain out of its recession – 60 per cent of those polled said they were “not at all confident” about existing rescue plans. Advisers have a huge role to play in instilling much-needed trust into the industry and the RDR provides a chance for them to do so.
Some commentators have noted Conservative concern over adviser charging, which they believe could limit access to good advice if advisers leave the industry. While this is possible, many advisers are already adapting to the new environment and even the pre-RDR world provides no guarantees of ‘good advice’.
As to the Conservative Party’s apparent lack of commitment to the 2012 RDR deadline, this is no surprise. As the Conservative Party plans to wind up the FSA and replace it with a new Consumer Protection Agency they will want time for the new body to find its feet and review the value of proposals already in train. Their position requires greater clarity or risks laying them open to attack and accusations of dithering when clear thinking is required. We must avoid a watered down RDR in 2013/14 should the likely Conservative election victory take place.
The Conservatives have long held the view that the tripartite system of regulation is not optimal. Many others hold the view that the Bank of England should never have lost its role in macro prudential regulation. Others still argue that the FSA has failed in its prudential responsibilities to deliver a stable environment within which the insurance industry can operate and foster consumer confidence. Whatever future regulatory structure is established in the future, it must be capable of helping the industry create a sustainable and profitable business model that equally gives consumers trust and confidence in the products and services this industry provides.
Yes, a new administration in number 10 will impact the implementation of the RDR. Of course, the current recession, which is severely hitting adviser income, will have an effect. And, yes, any new European regulation will give naysayers another excuse to try to halt the RDR wagon. But the RDR is simply too important to lose momentum.
Having said that, more creative thinking will also be required in the way the industry services the middle market. Simplified advice will play a part, but the workplace, bancassurance, Wrap, and the web could all evolve to meet the needs of this market, which used to be serviced adequately under the old industrial branch business model.
The financial services industry has spent far too long navel-gazing and needs to think about the end consumer. Our industry is more strictly regulated, more professional, and with higher levels of consumer protection than ever before. The RDR presents an opportunity to capitalise on this and we cannot afford to be side-swept by political distractions. Whilst the RDR is imperfect, it represents an opportunity to transform our industry into a trusted and reputable profession, which places customer service at the heart of the offer.