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MM leader: RDR was not a cure-all for the market’s ills

Natalie Holt website

At first glance, the Government’s announcement of a review into the advice market did not look that explosive. The review talked of lofty but ultimately vague aims of changing the sector to work better for consumers. Woolly references to “safe harbours” and “amending regulatory perimeters” did nothing to help persuade people that here was something worthy of note.

Yet the vague missives from the Treasury belie what could amount to a fundamental overhaul of the advice profession and how it interacts with one of the biggest issues advisers are facing today: spiralling and unsustainable regulatory costs.

The review offers advisers a platform on which to make the case for wholesale regulatory reform. The “exceptional costs” of Keydata, Arch cru, and now collapsed Sipp advice firms show no sign of abating, and advisers are bearing the brunt of these costs.

Personal Finance Society chief executive Keith Richards says advisers should make this argument through a consumer-focused lens. The professional body seems to be making headway with this approach.

Yet the numbers also speak for themselves. Money Marketing has heard from several firms whose FCA fees have gone up threefold in the space of a year, with some experiencing even more severe hikes.

What smarts is the advice review, and the FCA’s similar Project Innovate, contain the tacit admission that the advice gap is a real problem and, while it boosted standards in some respects, the RDR was not the cure-all for the market the regulator expected to be. Never mind that advisers were beating that very drum in all the years leading up to the reforms.

If the advice review manages to deliver more proportionate regulatory costs, then firms may start looking at ways to help those would-be clients who have been left out in the cold up until now. But it could also signal a model for banks and providers to be the ones to plug the advice gap – is that a price advisers are willing to pay?

Faced with its flagship pension freedom reforms being left in tatters without a solid advice system to underpin it, the Government has taken matters into its own hands with this review. The question is, with the Treasury at the helm and the FCA its obedient servant, at the end of all this who will be the ones to question whether this revolutionary advice review delivered on what it promised?

Natalie Holt is editor of Money Marketing – follow her on Twitter here



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There are 7 comments at the moment, we would love to hear your opinion too.

  1. I do very much hope that the bodies that the government will (supposedly) be listening to really go to town on the RDR, warts and all. It has been a total failure (with one exception) in the way it was thought up, badly designed, implemented terribly, is not really of benefit to anybody (industry, advisers, or clients) and has cost 10 fortunes so far with lots more fortunes to come.
    I don’t think anyone could argue against the uplift in qualifications as being anything but a good thing however the FSA at the time did not need to impose the RDR.
    They could have changed the rules around commission (for those who were happy for the adviser to be paid that way) to customer agreed remuneration which is basically what we had, prior to RDR.
    Supposedly got rid of bias. Is the same bias that the FSA talked about but could find no evidence of it in the adviser market? Is this the same bias that the openly recommissioned a survey to ask if people thought bias COULD possibly exist?
    Transparency of costs? How much more clear could the illustrations have been in demonstrating our commission and the product cost compared to now showing the adviser charge and product cost? The answer is: Absolutely no clearer in my opinion.
    Clean share pricing? As the youngsters these days say “WTF is that all about?” I have had more queries from clients who get regular bumf from their platform showing the sale of units across funds to cover the charges. So many complaints about the amount of ‘cr*p” they receive this useless information on. Why won’t the regulator accept that the huge majority of people could not care less about individual listings of all the various costs. They are only interested in the total amount. Exactly the same way when we all go shopping the huge majority of people do not go down the items listed on the receipt. They are only interested in the bottom figure as that is what they have to pay.
    Banning rebates, cutting off legacy trail (which, in my opinion, has been the single cause of churning of business on platforms EVER in order to switch from bundled commission paying products to clean priced, adviser charging products simply to keep ongoing income). Apologies for the language but what a lot of bollo*ks. A lot of work for the adviser and no difference in terms of what client pays. In some cases the clients are now paying more for ongoing AC than previous trail. The main reason being that we all have higher costs now than before and this has to be paid for, so I am not knocking anyone who does this as I have done it myself and will continue to do so where appropriate.
    The effect on the 5% withdrawal on bonds where clients prefer AC via products, no factoring on RP pensions etc etc and do not start me on the total and utter cluster that is the Indy vs restricted debacle. The reduction in availability of affordable advice to the mass market as a result of the RDR and the total number of jobs lost throughout the industry is disgusting. The list of disastrous consequences of RDR goes on and on like Ariston and all because the architects of the RDR pressed ahead because they thought they knew better. They refused point blankly to take on board the industry concerns, adviser concerns when the points mentioned above (and a lot more) were brought to their attention on many occasions.
    Not that I think anyone reading this will need to be made aware, but I am not a great lover of the RDR.

  2. The RDR has brought a few improvements, notably a higher qualifications benchmark and the removal of commission-driven selling. But, upon securing Parliamentary assent to it in its original, basic form, the FSA went off like a bull in a china shop and embarked on a programme of endless embellishment and complication, completely OTT. This process continues today. So what could have been, actually, quite a valuable and beneficial reform of the industry has turned out to be fraught with all sorts of unseen complexities and additional costs in pursuit of perfect outcomes from every advised scenario. That unattainable, self justifying pot of gold at the end of the rainbow. The FOS is making things worse.

    Can any of what the regulator has landed on us now be ripped away in favour of a back to basics approach? Probably not. But forcing the FCA to abide by both the spirit and the letter of the Statutory Code of Practice for Regulators could well be a major step in the right direction. The TSC needs and is now seeking the powers which, amongst we hope much else,that will enable it to force the FCA to do so. For far too long the FCA has been an unbridled monster trampling roughshod over any one and any body that dares to try to stand in its way.

    On just whose authority has the FCA granted itself a unilateral opt-out from Statute anyway? Address that and force the FCA to heel (if necessary with a big knobbly stick) and things may just start to change for the better.

  3. Christopher Petrie 21st August 2015 at 1:22 pm

    I don’t think RDR causes any advice gsp….other than saving unsuspecting bank customers from being ripped off….but the FOS certainty does.

    No business can plan when it feels 7 years later it might be sued and judged by an arbatory system that judges with hindsight and different standards than when the event happened.

    That’s the problem and nothing to do with RDR.

  4. The RDR caused more problems than it solved.

    The pathetic rationale, extracted with care from various surveys, could clearly be seen as the results of a desperate search for evidence after having already reached a decision.

    Add to this the FOS puzzle and the relentless increases in costs and levies and you have the perfect recipe for consumer apathy and widening of every possible gap bar certain regulators bank balances.

    MPs and the press need to wise up to the stark reality. The practitioners are not rip-off merchants, many are struggling to survive in an environment that places a greater onus on keeping consumers appeased than it does on solving problems.

  5. If something doesn’t change RDR will have been just one of the final nails in the industry’s coffin. People who brought this about are no longer employed by the FCA but sit with impunity watching the industry slowly disappear down a sink hole of ever increasing regulation, extra costs and no new blood arriving meaning whoever is left is faced with even bigger costs in the future as adviser numbers shrink. The talk of extra qualifications is a joke when you look at the experience that has left the industry and what those extra qualifications represent in the real world. The warning signs were being flagged up long before RDR was introduced but the powers that be thought they knew better. We all know for sure they didn’t, and still don’t.

  6. Sadly, the most noticeable achievement of the RDR is that it has lead to an increase in charges for the consumer. I doubt that was what the regulator intended. The regulator would achieve better outcomes for clients if it worked more closely with the industry rather than trying to suffocate it with poorly thought out reform.

  7. The RDR was a crock, from start to finish, let me expand …… there was not one area of the RDR that could be measured against its objectives (very clever !), Yes we passed exams but did that make us more professional ? yes or no, this is an opinion, more protection for the consumer ? yes or no, again opinion, removal of commission, did this remove bias ? yes or no, again opinion, did the bad advisers get run out of town, yes or no ….. and so and so on ……..

    The goals of the RDR as you see, were and were never meant to be definitive, blame cannot be laid at a door if its based on opinion !

    And we know all 50/50 differences in opinion between the industry and FCA will of course be settled by ….. yes the FCA

    I once had a (heated) debate with a chartered FP, he was cock-a-hoop at the RDR and thought all advisers should be as educated to at least his level and or beyond, and run his business like him, because he was high end, and dealt with high nett worth etc etc etc !

    If I tell you now, he has disappeared, because all he sold was SIPPS, UCIS, overseas property, pension release etc etc etc

    RDR ?….. did it, or will it ever cure all the ills ? my opinion is no, and that doesn’t count because (as I’m led to believe from the gentlemen above) I’m not being constructive, and living my life in the past and need to move on.

    Maybe he is right…….. oh sod it.. you make up your own minds !

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