MPs launched a sustained attack on the retail distribution review during this week’s parliamentary debate on the regulation of IFAs.
In an unusually well attended backbenchers’ debate on Monday evening, heard by around 80 MPs, concerns were voiced over qualifications, grandfathering, regulatory cost and the impact of an advice gap.
Treasury select committee member Conservative MP Mark Garnier said it was not MPs’ intention to derail the RDR, but he warned: “In addressing the problems, the FSA, through the RDR, introduced issues that disproportionately affect the IFA community. I fear that without the FSA looking again at grandfathering and without a rethink about commission, independent financial advice will become the preserve of the wealthy only.”
Many MPs called for the introduction of some sort of grandfathering saying it was common practice in most industries.
Conservative MP Heather Wheeler, who is an affiliate of the Chartered Insurance Institute said: “I was trying to find other areas in business where new rules were to be introduced who were also not given grandfather rights and I just cannot.”
Labour MP Nia Griffith said getting so many people qualified in such a short period of time was “not really a practical idea at all” and that exams did not test the integrity of IFAs.
Conservative MP Geoffrey Clifton-Brown went further, suggesting the RDR should be put off for five years to help the new regime bed in properly. He said: “I say to Mr Sants, who is he to put 5,800 businesses out of business at the stroke of the pen and what is the problem that needs fixing?” Conservative MP George Hollingbery said: “When so many people have clearly neglected to provide for their later years, it does seem to me to be perverse that we should be reducing the number of suppliers in the market.”
Treasury select committee member and Labour MP George Mudie said there seems to be a “lack of interest” over the reduction in choice the RDR will present to consumers.
Commenting on FSA chief executive Hector Sants’ statement last week that losing up to 20 per cent of IFAs due to the RDR would be an acceptable cost, Conservative MP Harriett Baldwin said: “Can you imagine the outrage there would be in this chamber if a minister came to the box and said I am going to put between 20 and 30 per cent of an industry out of business.”
Conservative MP Guto Bebb said: “We have a coalition Government stating quite clearly that we want the private sector to be creating jobs, that we want to get rid of the red tape and bureaucracy which has stifled a generation of jobs within small business, I do find it odd this particular sector is being earmarked for different treatment.”
Treasury select committee chairman and Conservative MP Andrew Tyrie said: “There is one crucial point we must just get across to the FSA, which is that the increase in these compliance burdens is going to be paid for by the consumer.”