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Peter le Beau: The RDR and the law of unintended consequences

The scene, a draughty corridor in Whitehall.

Minister: Well, Sir Humphrey, how is the retail distribution review going?

Sir H: Going? I fear it is nearly gone.

M: You sound a bit unimpressed Humphrey.

Sir H: Not unimpressed Minister, just a bit incredulous.

M: Incredulous? Why should you be?

Sir H: When it all started off, what were we trying to do?

M: Protect the public from cowboys and improve the standard of financial advice.

Sir H: And by public we meant?

M: The man in the street, Humphrey, on the Clapham omnibus, you know who I mean.

Sir H: Well, Minister, I think it depends what street you are talking about. I think we’ve done a pretty good job of protecting the man in Mayfair or Sevenoaks High Street, or a leafy lane in Wentworth. Not so sure about Clapham – although it’s pretty posh there now. As for most of the rest of the country, they’re on their own.

M: What are you babbling about Humphrey? We didn’t like commission-hungry advisers ripping off the public so we banned commission and made investment advisers fee-based.

Sir H: And the effect of that Minister?

M: Everybody gets much better advice from a much better class of adviser.

Sir H: Then why did the recent Financial Services Consumer Panel survey reckon that considerably less people have access to financial advice?

M: Must be a mistake, Humphrey. We also specifically wanted to close the protection gap and ensure pricing wasn’t distorted by commission.

Sir H: The protection gap, Minister? Did you just say protection gap?

M: Yes, Humphrey. I read it was now £2.4 trillion.

Sir H: Indeed, Minister, but I think you have your logic a bit mixed up.

M: And pray tell me why?

Sir H: Well, Minister, we wanted more people to get financial advice but we have reduced the number of advisers. We wanted to protect the public from less qualified advisers but they will now all start selling protection because they can still earn commission.

M: So sales of protection will go up next year then?

Sir H: Indeed they would Minister – if prices weren’t going up because of gender pricing differentials disappearing and the tax system changing.

M: Oh really, Humphrey, that’s a very pessimistic view. That certainly is not meant to happen.

Sir H: Ever heard of the law of unintended consequences, Minister?

M: Yes, it keeps rearing its ugly head.

Sir H: I’m afraid it has again, Minister. We’ve wanted more people to get better financial advice and we’ve actually got less; we’ve tried to encourage protection and sales are going to be tougher to make next year; and loads of good advisers are leaving the business because they don’t feel they can make a living in the new regime. So I’m not really quite sure if Joe Public is a heap better off. Are you, Minister?

M: Oh dear, it’s all very complicated, Humphrey. Still, hopefully we may have some good news for the industry on long-term care.

Sir H: Yes Minister, but probably not in our lifetimes!

The Minister sighs,shrugs and dunks his biscuit… it falls into his tea.

Peter Le Beau is managing director of Le Beau Visage

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Great article Peter. It would be so much more amusing if it wasnt so damn true. I see from reading more and more article that all the former pro “RDRites” have become les and less vocal as we get closer to the deadline and evryone sees just what a total c*ckup this project has become. The Regulator wouldnt listen and look what is happening. The start of the end of profitable advice to mass market. They will just end up leaving more cash on deposit and theat is going to do them a whole world of good.

  2. In short, are regulators and governments capable of making decisions which will benefit consumers?

    While making his point in an amusing way there is an extremely serious aspect to this. Has anybody noticed how more and more commentators, pundits and consumer flagwavers have come to understand that the RDR and the failed policies of a discredited regulator (and apology for a government) are likely to have the opposite effect to that intended?

  3. Show me an industry that has benefited from government intervention!

    When there is a massive U turn in a few years I wonder how many RDR supporters and politicians claim they were against it?

  4. Good news Peter – with only a few tweaks you’ll be able to submit the same article for TCF and Simplified Products.

  5. I have seen the standard of pension advice provided by a national firm, the adviser meets RDR requirements but he still gave poor advice and his firm has to stump up almost £50,000 for a very simple mistake because he evidently didn’t know what he was doing whereas anybody with 25 years experience would have spotted the problem immediately.

    The RDR gives these people a license to carry on regardless.

  6. Don’t worry said Humphrey, Hector Sants said it will be OK when he was asked about the unintended consequences: http://www.moneymarketing.co.uk/regulation/sants-people-will-not-be-excluded-from-advice-under-rdr/1033295.article

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