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Protect and survive

Thirty per cent of advisers working for small IFA firms will leave the industry due to the retail distribution review and 30 per cent of all IFA firms will reduce their numbers of advisers. There will be reduced profitability for product providers, with 60 per cent of firms believing the RDR will reduce their turnover.

Increased compliance costs will be passed on to the consumer and consumer unwillingness to pay fees will result in less interaction with the industry, with 41 per cent of these consumers ultimately taking no action at all. The ban on provider factoring will make some business models unsustainable and more complex regular savings products could become less attractive for advisers to sell.

No, this is not a newly discovered tract from Nostradamus, these viewpoints are drawn from the Oxera report on the Impact on Market Structure Due to the RDR. This research has, apparently, informed the FSA policy statement which was published simultaneously.

As an RDR bore, let me risk wearying you further by saying that the FSA clearly believes this is a price worth paying. They believe that a massive reduction in consumer interaction with the industry and dramatic falls in the numbers of advisers is acceptable collateral damage in the rush to force their dogma on the UK population.

Talking of dogma reminds me of the Pink Floyd album, Animals. Music tends to play a major part in many people’s lives and last week, during some boring interlude, I was considering the parallels between the Pink Floyd and the FSA. Not many similarities you would think. Hector Sants making use of his whammy bar and Dan Waters playing complex drum fills on his six-piece Ludwig kit sounds a scary proposition.

Nonetheless, the similarities are there. For instance, back in 1977, Pink Floyd was considered a musical dinosaur in light of the emergent and uncompromising punk movement and the analogy here is that the Conservatives hold similar views concerning the FSA.

Additionally, a number of song titles spring readily to mind, such as Set The Controls for the Heart of the Sun, Empty Spaces, Brain Damage and Poles Apart. However, the most compelling is Momentary Lapse of Reason, the album that, like the RDR, was toured extensively over the three-year period between 1987 and 1990, before being put to bed.

Protection plans appear to have escaped the venality of the RDR proposals and this is the only good news to emanate from Canary Wharf publications in recent years. It seems that even the FSA accepts that protection is sold and not bought and, perhaps grudgingly, accepts that to move protection across to the mooted adviser-charging system is an experiment too far.

If we wander back to the good old days, before regulation and political interference, the industry was built around the concept of selling life insurance. The attentions of the home-service agents ensured that millions of consumers – most of whom would never have sought out either a product or advice – received valuable life insurance and an introduction to financial services.

It just might be that those RDR survivors start to pay greater attention to protection matters rather than the sexier wealth management. Protecting what you have got always comes higher on the list than saving for an uncertain future.

Alan Lakey is partner at Highclere Financial Services and director of Adviser Alliance


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