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Editor’s note: The RDR has worked for advisers and consumers, but the job isn’t done

During the six-year-long gap between when the RDR kicked off and when reforms came into effect, it was understandable that a significant proportion of advisers felt uneasy. Changes to qualifications, ongoing professional development, fee transparency and commissions required an overhaul in some firms’ models. But now, you’d struggle to find more than a handful of advisers who would fight to reverse it.

This is because, while professional indemnity and compensation scheme bills have undoubtedly put pressure on margins recently, the overall trend since the RDR in 2012 has been a boon for advice businesses, which have seen surges in demand, revenues and profits.

It is against this backdrop that the FCA is going back to the market to see where it thinks we are now.

Do advisers agree that after the watershed reforms, and the subsequent Financial Advice Market Review, which specifically focused on affordability and access issues, a more “resilient, effective and attractive retail investment market in which consumers would have confidence and trust” was in place?

Frankly, there’s a huge amount of good news. Studies suggest product bias has come down, there is (slightly) more shopping around and adviser numbers are back on the up.

But, as the regulator notes in its call for input on how it should evaluate whether the RDR and FAMR have been a success: “We have some concerns that, in parts of the market, there may be problems with conflicts of interest, poor treatment of consumers and misleading or confusing communications. Consumers can struggle to assess the cost of advice and may overpay for services which they do not need.”

It does not specifically mention this in its paper, but one of the key trends to emerge since the RDR has been vertical integration and a trend moving towards restricted status (or retaining “independence” within a group structure which also includes asset management, platforms or advice technology).

One of the short-term indicators of RDR success will be that “consumers understand the difference between different types of advice”. I’m not sure they do. Another will be for firms to “describe their advice services appropriately as independent or restricted”. Again, I’m not sure some do.

When it comes to the conflicts and charges question, the FCA has already found that restricted advice is not cheaper than independent. What would it find if it took a much deeper look at how the advice at major vertically integrated firms really operates today? Have we essentially bred the same conflicts between providers and advisers that commissions did, but they now just live under the same parent?

The regulator has allowed advisers to dictate where it casts its gaze. They should not miss this opportunity to input at a critical moment for the profession.

Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. Trevor Harrington 9th May 2019 at 11:31 am


    It would seem that you are the exact problem in the concept of the “fake press”.

    I do not know where you get your assertions from concerning the success or failure of RDR, and whether Advisers would reverse it or not, or perhaps we might prefer to make changes that might make it work.

    RDR has been a complete and utter disaster for all concerned, notably clients and people who would otherwise want to be clients but cannot now afford to be.

    It has been hugely inflationary, and the resultant change to Adviser processes, including increased overheads cannot under any definition be called a success.

    If you are going to be a Journalist, may I respectfully suggest that you do your investigative work thoroughly before you put pen to paper.

  2. Steven Farrall 9th May 2019 at 11:43 am

    “which have seen surges in demand, revenues and profits”. In other words the catastrophe of the RDR has restricted supply and hence increased prices.


  3. You seem to a little out of touch Justin.The victims of RDR have been those who needed advice most and not find it not affordable.

  4. NOW find it not affordable

  5. Philip Castle 9th May 2019 at 1:10 pm

    Failure or success on key points (adjusted from DH’s):

    Massive increase in costs = FAIL
    Massive increase in bad advice = Cause and affect not proven
    Massive increase in scams and fraud = Cause and affect not proven
    Massive decrease in advice accessibility = FAIL
    Massive decrease in consumer confidence =FAIL
    Massive decrease in competition =FAIL
    Massive decrease in product innovation = FAIL

  6. Christopher Petrie 9th May 2019 at 2:12 pm

    I think RDR has been a positive step. It’s stopped those life companies selling rubbish products by offering higher commissions for a start.

    It’s stopped product bias.

    It’s got rid of plenty of well meaning but incompetent financial advisers (we all knew them).

    It stopped the banks in their tracks, who had been ripping off millions of people for years.

    Advisor numbers are moving upwards again (see other articles in MM today for the evidence). Training schemes and apprenticeships are common amongst the big companies.

    But it’s still work in progress.
    Miffid 2 needs to apply to all products. That would shake SJP up who so far seem to be absolved from RDR rules.

    Miffid 2 disclosure from platforms is already shining a strong light on industry charges….it will ultimately have a beneficial effect for investors.

  7. I see many negative comments, but overall Justin I’m with you.

    However – as you say – there is still much to be done. The pitifully low exam bar is a bit of a farce, but I guess it is better that what went before.

    The banning of commission was just half a job. Life assurance and the rip off equity release sill have usurious rates of commission.

    I suspect that those bleating about accessibility and affordability were the ones selling cheap products with somewhat high pressure selling to those that didn’t really want the stuff in the first place. The take up probably had very poor retention rates.

    In my view too many advisers confuse financial advice with social work. The secret is in the title Financial – those with finance are now potentially much better served and as Chris Petrie has said there has been a big clear out of sub-standard products. That’s not to say that they have all gone. The same regrettably is true of cowboy advisers.

    Overall I think RDR was definitely a move in the right direction and I well recall when on the board of AIFA, that this wasn’t the general consensus at all. Many were dragged screaming into the new (and better) regime.

    • Philip Castle 9th May 2019 at 4:08 pm

      Harry – We don;t advertise, we don’t need to we’ve got enough clients and enough business, but we still get referrals for people aged 55 or so who haven’t seen an adviser for 20 years or so and by the time we meet them, it’s too late to do anything significant about planning for the future/their retirement.
      The people who need advice the most are probably agreed 35 to 55 as they are the ones where advice will make the most difference to their futures.
      Those under 35, it’s all mortgage, borrowing and auto enrollment pension which is a once every 5 year live change, so reviews probably needed every 3 years and not the annually mandated now for investment and pensions which isn’t cost effective for the consumer, plus they don’t have the inclination for an annual meeting when nothing significant has changed, so why pay for a review.
      For mortgages and protection a consumer doesn’t need the cost of a level 4 adviser or especially a level 6, they just need a level 3.

      • Philip Castle 9th May 2019 at 4:11 pm

        OH and to advise on someones options with their auto enrolment pension, did it really need the FCA to move the goalpost so the advsier had to have a level4 and not just a level 3? I don’t think it did since post stakeholder pensions. Simple products,simple charges and simple options until the fund reached a half decent size would have sufficed.

      • Phil

        You knew that I would disagree! Education isn’t the be all and end all, but it is never wasted and is an excellent adjunct to experience. So level 3 for mortgage protection? I thought advice was supposed to be holistic. What about IHT? What about trusts or life of another? What happens when/if the client comes back after an inheritance and wants further advice? The level 3 adviser will just be stuck with his/her thumb up their backsides.

        • Trevor Harrington 10th May 2019 at 10:42 am

          Morning Phil and Harry,

          To me, the issue is not that RDR failed in all respects, it is just that it failed in most respects, and more to the point – Had the regulator taken on board the points which the Adviser community like ourselves were saying to them at the time, then it could have been a defining moment for Financial Planning and a huge success.

          Instead, we were left with the bias views and dogma of a regulator who refused to listen, refused to recruit from the IFA community (and still does), but instead had a blind fixation on commissions and the re-training of existing highly accomplished Advisers who did not want it or need it.

          The net result was that we lost an awful lot of very good Advisers because they refused to do the re-training, many of whom found it an insult to their integrity, and a commission ban on some products but not others, where a revisit to the previously failed hard disclosure regime would have produced the result which they were looking for (and which they continue to look for today).

          My opening point is a simple one, but one which is probably the greatest problem that the western world faces today. The inaccurate “fake” press.

          Politically and democratically, the World has got to have an accurate Press if democracy is to survive, and we are to beat back those who would prefer to insert their own crusades.

          The subject matter of this article may be a small point, but the authors prognosis needs to be highlighted as the utter drivel that it is.

          This article attempts to label RDR as a success, presumably because of the writers own bias and personal political intent. Just one glance through the subsequent comments (all our comments above), illustrates quiet clearly that this is most definitely NOT the case.

  8. Broadly agree that RDR has been positive, but I agree that lack of accessibility to advice and lack of competition are worrying trends for consumers.

    Focus over coming years really should be on fit for purpose products and the current practices within fund management. Come on FCA. Time to get cracking.

  9. Perhaps overall there are both positives and negatives to the RDR which have been eloquently laid out by previous contributors.

    On balance it has certainly been good for advisers, work is plentiful and it’s a sellers market as a direct result of the changes.

    For clients it’s a mixed bag. Costs have increased significantly but wealthier clients now have access to a better standard of advice and there are more client focussed products and services than there have ever been. On the other hand, the average member of the public has largely been disenfranchised from advice and like it or not this has been directly driven by regulation.

    I doubt this is the outcome the FSA/FCA wanted but it was eminently foreseeable. If you insist that everyone drives a BMW/Mercedes/Lexus then there will be a lot of people left walking. Perhaps it’s time to accept that regulation needs to adjust, be practical and be realistic. Alternatively, the good folks at the FCA, with high ideals and dreams of perfect advice for all, will continue to wonder why it isn’t happening… perhaps they can introduce a rule…

  10. Duncan Gafney 16th May 2019 at 3:52 pm

    As many have noted RDR is and was far from the all out success Justin is painting it out to be.

    In some areas it’s been really good i.e an increase in professional standards, whilst in other areas such as access to advice and the cost of advice it’s been an utter failure.

    RDR could have achieved vastly more than it did, but unfortunately it was let down by a regulator run by politicians and ex bankers who are more concerned about their own career path, than doing the right thing.

    RDR could have set the template for good and accessible advice, instead, it created a world where you can borrow money easily and quickly, but if you want to save it, you will need to pay major upfront fee’s if you want any advice.

    But when the entire concept is based on the principle that people are less likely to get into trouble borrowing, than they are saving, you know it’s not driven by any desire to do it right.

  11. RDR banned commission and gave birth to vertically integrated firms , tomato to tomatoe

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