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Rethink the RDR

This decision would be astounding, were it not made by the same team that failed to regulate the banking industry responsibly.

In the end, it seems the FSA executives felt their reputations depended on it and that to rescind from such an expensively created position was simply career suicide.

You have already set out, thank goodness, to fix the broken regulatory system Labour created when they built their super regulator.

Having been regulated since 1987, I can testify that the FSA is the most spendthrift and least able master we have seen since 1987 and while their failures in the macroeconomic sphere will trouble you most, please spare a moment’s decision making for the retail consumer of financial advice. While a simplified product range and the Consumer Financial Education Board might well help in the long term, people will still need advice if they are to make proper personal financial provision.

And if they are to take advice, then every release of Financial Ombudsman Service statistics shows the IFA’s track record in providing this fairly to be simply miles better than that of the banks or other big corporate alternatives.

The Barclays protesters are the latest to demonstrate the folly of building a system that encourages large corporations to provide financial advice to ordinary people.

The UK consumer is far, far better off with someone advising them who seeks primarily to profit by maintaining the client adviser relationship. And for this proven model to continue to exist at scale in the mass market a thriving IFA sector is a requirement.

The single biggest threat to any IFA’s future, and particularly those seeking to serve the wider market, is the RDR. The FSA accepts it will cut numbers by 20 per cent but it is certain to cause a far greater cull. It will accelerate the already consistent decline in consumer access to decent advice.

While any industry as diverse as UK retail financial services is easy to divide and rule, the many voices who have tried and failed to stop or prune this regulatory juggernaut include all the leaders of major IFA firms or networks – the very distributors of financial advice that consumers are pretty much starved of.

Such leaders were listened to but ignored by a Blairite FSA team determined to achieve the grand project rather than grub around with individual issues.

Clearly, with such a multi-faceted and all embracing reform there are many elements worth saving but the overall focus on creating theoretical perfection no matter the cost is needlessly ruinous and will most certainly leave consumers in the hands of the major corporates.

Happily, your Government has no political capital to lose in requiring the new Consumer Protection and Markets Authority to think the RDR through again, so please take this last chance to place a Conservative stamp on the future of financial advice.

And may I add a last caution? The people at CPMA you would charge with the review of the RDR are mostly the same ones who decided to press on regardless last time. Watch them closely!

Good luck.

Tom Baigrie, managing director, Lifesearch


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. I agree wholeheartedly Tom. Having spent the last 30 years of my life as an IFA advising clients on a day to day basis I have witnessed the slow destruction of my industry at the hands of those who claim to be on the side of the consumer. I beg to differ. The results point to readily to the influence of the banking sector right from day one. Lobby groups and carefully placed ex-banking employees at the heart of the regulator can go a long way to getting what you want. They have mostly succeeded at great cost to the public at large. I leave you with one simple question. Would you trust the very people who almost destroyed our economy and have been busily mass mis-selling protection insurance for decades to give you advice on how to handle your financial affairs?

  2. After speaking to many IFAs on the subject I can safely say that most are fed-up to the back teeth now with RDR. The industry is split – those that have already re-designed their brokerages, those that are playing the game and making the most whilst stocks last and the rest planning an early retirement with heads in the sand.
    As regards the banks – best advice has never been on the agenda. market share is everything. Young advisers cost less to employ and are expendable if there is a complaint. Middle management (pressured by upper management) have always been the bully boys with the big stick. Heroe one minute due to sales figures……. snubbed and managed out the next after it all goes wrong.

  3. RDR does not mean good advice is given.

    Qualifications do not mean good advice is guaranteed.

    Fees charged do not mean good value is provided.

    The costs of “regulation” is now so high it is self defeating and the consumer ends up getting poor value as a result.

    Product providers will find it more cost effective to do business direct or online and the banks will gain market share as they will be the cheapest source of advice.

    With the cost of compensation on the NHS rumoured to be some £15 Billion this year all of course paid for by the tax payer, why do those in financial services have to pay the cost of compensation when others such as those in the NHS do not, or is one’s life not as important as one’s money?

    The whole system is unjust and unfair.

    Solicitors, doctors, accountants all have long-stops but IFA’s are not allowed to have any aso are responsible for their advice until they die. Again unfair and unjust.

    Regulation is now a massive industry of it’s own and getting larger and larger year on year and soon it will devour us all as we fight to feed it.

    Regulation of advice has simply proved to be impossible and not costs effective and we now need regulation of products, including commission and charges.

  4. Julian Steve4ns 10th August 2010 at 1:13 pm

    There is no point in responding to any FSA consultation exercise ~ they’re all just a hollow sham.

    The names of the respondents may be listed on the FSA’s website but not what any of those responses were. When asked what the FSA has done in the wake of the consultation feedback it has received, a spokesperson just says something blandly evasive such as “We have taken on board the comments received.

    What comments? On what aspects of the consultation? Comments from whom? How have these comments been taken on board?

    Answers to those questions are never forthcoming. And this from a regulator that describes itself as open and transparent. Hogwash.

  5. Thank-you Tom. What will it take to get before the powers to be realise that RDR will not be a solution but a hindrance. Banks will SELL their products to the uninformed public ( as now, but on a much larger basis ) Those IFAs ( including myself, I hope ) remaining will not be in a position to take on clients of retiring IFAs and those clients will be at the mercy of Bank SALES personnel. – Their savings will be eroded, pension contributions stopped or not reviewed etc etc. Jo Public will be financially worse off. = More state benefit, = more tax for those who do manage to stay afloat. Yes this will be BRITAIN in the future which I once was proud to be a part of but we were then known as GREAT BRITAIN

  6. I agree with all the comments posted so far.

    I have tried to ‘get my head round’ what has been happening to IFAs over the past 15 years or so and I struggle to understand why a sector that has very few complains when compared to the banks is targeted by the FSA and expected to bear the brunt of the cost.

    The FSA was set up with the intention of increasing consumer confidence in financial services. This has clearly not happened and yet, as has already been stated, the same people who have failed so dismally to date, look likely to remain in charge of the new regime when this is introduced.

    We have had a similar experience some years ago when the regulator told us we could only take fees (CP121) which never came to anything. Now we have had the uncertainty of RDR hanging over us for the past year or so and many of do not know where to run for the best and feel we are just haning on until somebody else decides our future.

    The press do not help mis-reporting about commissions and fees and making consumers even more nervous.

    You can run a very successful business which has never (in our own case) had a single complaint against us and still be expected to pay for the likes of Key Data who have not run their business properly.

    I don’t think any other profession is treated in this way and yet I cannot understand why. It feels like a vendatta and I can only conclude that regulation is an industry in its own right which is now beginning to strangle those that it regulates.

  7. There is a clear turning of the tide regarding the RDR.

    We know that the FSA “is not proud of it” and we know that 11% of the adviser population jumped ship between 2008/2009.

    We know that Aegon, AXA and others find it too difficult and unprofitable to trade within the UK and we know that the Co-op is selling its IFA arm due to the cost of compliance.

    We know that Moneysavingexpert, Martin Lewis, believes that the commission-ban will be to the detriment of consumers and we know that our clients are unsettled by the prospect of fee charging.

    We also know that Mark Hoban and the FSA are not listening because it serves their purposes to continue with a set of proposals derided by the bulk of the industry.

    Let su also put an end to another Big Lie – the one that says the RDR was a result of industry pressure. The Tiner/McCarthy double act conjured up this particular harpy and this will be their legacy.

  8. This is all good stuff but has this letter gone anyware and if so how can we all support it , do we need to get a 10 downing st lobby set up on line ? I dont know how we can challenge the RDR .What else can we do – for once as a group – to get a proper review ?

  9. The arguments against RDR are well known and the tide is indeed turning so here are the reasons for the ‘rethink’ that Tom advocates so beautifully.

    The advice model is broken – a lie started by McCarthy at Gleneagles – even the FSA’s own independent surveys find no evidence and the IFA sector has fewest complaints by far.

    Under qualified advisers give bad advice – where is the evidence and where does it say that qualifications equal better advice. How can an adviser be qualified to advise one day and not the next. Indeed where is this widespread bad advice in the IFA sector ?

    Commission bias – never been found and all independent surveys carried out on the FSA’s behalf says so clearly. The best bit is that the FSA NOW state that the RDR will bring bias to the advice model but in their own words it ‘cannot be helped its a fact of life’ – so why on earth commission the RDR in the first place me wonders.

    The time has come to rethink the RDR – the FSA know it, government knows it, the public knows it and so does the industry. The simple fact is IT WILL NOT WORK so for once do what is best for the industry and the public and not for the FSA – rethink it ALL before the damage has been done

    McCarthy’s statement may well become true if the RDR happens only difference is that this conversation will be happening again in about 5 or so years time only then the advice model will be WELL and TRUELY broken !!!!

    RDR was started under a preconception which was wholly inaccurate from McCarthy for which this industry will pay the price a price too high

  10. IT is not possible for the FSA to rethink the RDR.
    One of their two faces are at stake.

  11. Here’s Godfrey Bloom’s view of the FSA and the RDR (along with a few other clips)

  12. I am resigned to the fact the RDR will go ahead and will be responsible for the demise of many small IFAs especially those north of London.

    I have already remodelled my business activities by actually engaging in another business enterprise outside the realm of Financial Services.

    I might be a little more interested if the RDR were scrapped and the FSA or whoever it may be next moved to Birmingham or Manchester, away from the influence of those who they should be controlling.

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