Personal Finance Society chief executive Keith Richards says advisers need to consider whether they are “driving consumers to the wrong place” by turning down would-be clients with less to invest.
Speaking to Money Marketing yesterday at the PFS annual conference in Birmingham, Richards said the RDR had not caused the level of market disruption that had been expected, and that consumers seemed to responding to the reforms positively.
But he pointed out that while advisers continue to serve existing clients, they are choosing not to advise people with fewer assets.
He said: “With new clients, we are hearing that the RDR rules are having some impact with advisers becoming more selective. We are seeing some turning away of customers who are below a certain asset value. That is much lower than predicted but it is likely to grow over time. That compounds the advice gap problem.
“The growing concern for many is while there is a prediction that self-serve solutions will become more popular, that exposes consumers to much greater risk, because without being appropriately qualified and understanding the treatment of tax, a consumer could be making a catastrophic mistake with their finances.
“So we have a responsibility to consider whether we are driving consumers to the wrong place. If you have got a risk averse client, actually self-serve can be extremely high risk.”
On the issue of independence, Richards there is still a lot of “noise” about whether firms were complying with the FCA’s definition. But he said the bigger challenge is getting clients to understand advice labels.
He said: “If the industry is struggling to understand, what chance does a consumer have of understanding the difference. Especially now you have got advisers switching to restricted whole of market. The debate not only confuses consumers, it continues to fuel confusion in the industry and it probably frustrates the regulator.”
Richards argues there comes a point where firms need to satisfy themselves whether they are meeting the rules or not, and that actually the FCA is more concerned with good consumer outcomes.
He said: “We are not satisfied the rules are clear enough in every situation, but a set of rules cannot cover every situation- it is for the individual to apply the rules appropriately. Because if we keep demanding that the regulator give us clarity on those extremes, we complicate and confuse the matter further.”