The idea that the IFA sector should migrate and concentrate solely on to the high-net-worth market after the RDR is an idea that is already past its time. The continuing and deteriorating financial position of the UK economy has led to yesterday’s high-net-worth clients becoming today’s middle income or, in some unfortunate cases, no-net-worth clients.
But in some ways, the worst recession since the 1930s has been a godsend to the debate, as it has punctured the pompous hot air balloon of the improbably fatuous merit of the idea of IFAs being able to survive only on fee income.
As a result, the deteriorating UK economy has exposed the fatal flaw in RDR thinking.
Besides, what moron said that middle-income clients cannot have access to independent financial advice? Why just HNWs?
It is like a class bias that the Tories would be derided for if they had promoted it but instead it has come from the supposed “egalitarian” Labour Government. Unbelievable.
Many clients, HNW included, do and would still desperately need the commission or factored option from their life, investment and pension options due to affordability and cashflow requirements. Even rich people have money worries, folks.
Looking beyond 2012, it is also obvious that the number of IFAs remaining as independent after the RDR, will be considerably smaller than the FSA’s optimistic projections, which will leave an enormous gap in the financial advice market.
There will then be a financial advice “crisis, which I predict would then be solved by the FSA allowing the tied and multi-tied sector to have lower qualifications, or even a bit of emergency grandfathering to plug the gap. By far the biggest winner of this scenario would be the banks.
As these are going through all sorts of mergers, just to survive, the future of financial advice would be left in the hands of a de facto banking cartel, allowing them to exploit existing product suppliers.
Currently, product providers sell 80 per cent of their products through IFAs. After the RDR, that figure will diminish rapidly and they will be left at the mercy of a banking Dutch auction of their products and services.
Banks will inevitably then raise their charges and get away with it, because there would no longer be a credible alternative from an IFA market. It would have all but disappeared.
The net effect of the RDR after 2012 would be the worst of all possible outcomes. The banks, the very people who created this global financial firestorm in the first place, would then have control of the nation’s future, life, investment and pension savings.
Just think, a whole new market for the new generation of Alistair Darling-named “kamikaze” bankers to devastate.
Our customers would end up with less choice on providers and investment and face taking out products that consistently underperform due to the weight of their higher banking and management charges.
Added to this would be what politicians are already calling a “concentration risk” in banking but after the RDR this would also become further magnified by their monopoly of the life, pensions and savings market.
The biggest unanswered question in all this RDR debate is this – if charging commission is a bad thing for an IFA, why is it OK for a tied or multi-tied adviser?
If the FSA wanted to ensure that a provider was chosen only on cost, financial strength and service, why don’t they impose an industry-standard commission on all products sold, so that there is no possibility of provider bias?
A system like this already exists, called Lautro rates. What has happened to them?
I vote to reject the RDR in its entirety due to its blatant and one-dimensional banking bias. I recommend that you all do the same.