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Robert Reid: Why words are failing the FCA

A lack of clarity from the regulator has led to the confusion over independent and restricted, advised and non-advised, so it is little wonder that consumers don’t understand.

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Well, has it been worth the wait or is it like a sale where all the stock has been bought in?

I talk of two recent launches both with their origin in Bristol – the annuity directory given the thumbs down by Ros Altman and Hargreaves Lansdown’s announcement of its platform costs as it takes the steps to a no rebate world.

At a recent event focussing on the potential removal of trail commissions, Apfa found it necessary to dismiss the threat as not current but provided a view of the future likelihood of its removal. Perhaps it would be wiser to assume it will go and plan accordingly.

As I have said before, believing that regulatory change has finished is as mad as asking for a period of stability. We work in a dynamic market and need to accept that the RDR was not a destination it was part of a journey.

First the direct market and no rebate world will, along with the death of the title execution-only, level the playing field like no other series of events.

Making charges transparent removes any doubt that all services are chargeable and that level of charge needs to reflect both the services provided and the risk taken by the advice firm, along with the condition that the level of charges must not be excessive.

Now I can accept that some non-advised services are of a better quality than they are often given credit for. But as they take no risk at best they should charge the same as businesses giving advice and ideally less.

Regrettably, customers of the non-advisers all too often think that they have had advice. Making it clear that no advice means no recourse to the FOS and no FSCS is key and leads me to think a new version of the buyer’s guide could help here.

Whatever medium we use to get a message across about non-advised vs advised we must retain a balanced approach. That is where the recent guide on annuity purchase failed. It made the advised route less appealing by suggestion it was less customer friendly instead of concentrating on people understanding if they need advice or can go it alone. This guide is then torpedoed if the level of charge is higher when no advice is given. This would confuse anyone and it does.

I know the guide has been re-written but the fact it was skewed in the launch version demonstrated that the change in culture needed for a customer centric market has not yet reached all participants.

It is generally accepted that there is confusion over what is needed to retain the label independent. The regulator to tell us that advice was what the RDR was to designed to improve yet it hangs the independent label on adviser’s treatment of products. It allows the facilitation of payment via products then wonders why nothing much has changed.

For me independence of mind is far more important of whole of market coverage, I think that CP121 had the answer when it said fees means independence, as if your remuneration depends on investment, either on or off a platform, then your ability to be truly independent is restricted.

I realise that some may question the public’s willingness to pay fees but provided they see value in an adviser’s services that is not a problem in my experience.

This regulatory aversion to separating advice and product has led us to suffering the expense of the RDR with no real change put in place; all that has happened is the rearranging of the regulatory deckchairs.

One step forward but many backwards.

Robert Reid is managing director of Syndaxi Chartered Financial Planners

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