Advisers have used the RDR to increase the cost of advice despite lower product charges, research suggests.
Research commissioned by the FCA, published today as part of its initial post-RDR implementation review, has found the impact of the reforms on the total cost of investment remains unclear.
The research, carried out by Europe Economics, found evidence that product charges have fallen over the last two years.
But the report says: “There is evidence that adviser charges have increased in some cases (certainly,there is no notable evidence to suggest that these have fallen), and lower product charges may not offset this.
“There is also the possibility that some advisers are channelling more of their clients’ portfolios to lower-charging (i.e. passive) funds in order to keep total costs to clients low, rather than reducing their own charges.”
However, Europe Economics also says advisers are increasingly competing on ongoing service to justify the adviser charge.
It says: “Overall, the continued weak ability of advised consumers to assess costs and the quality of advice means advisers still face limited competitive pressure on price and, as a result, appear to be offering adviser charges in line with or greater than the commission they received pre-RDR.
“There is scope for consumers to pick poor proxies for the underlying quality of the investment service received. Given the observed change in product mix, changes in competition also appear to have led to changes in advice and product recommendations, but at this stage it is too early to assess whether this has driven any improvement in the quality of advice.”