The two most burning questions about the RDR, it seems to me, are just what aspects of the industry is the FSA aiming to fix and in what way will the requirement of higher examination standards address these issues?
For example, is there any meaningful body of evidence to suggest any direct link between inappropriate recomm-endations and poor technical knowledge?
I suggest that the most common cause of poor standards of advice is the drive to sell and to meet sales targets imposed by someone else. That is where the banks’ distribution model leads the field – and by a wide margin. The FSA knows this but refuses to admit it, much less do anything about it, and exam passes are not going to fix it. All we will have at the end of the RDR, as presently proposed, is fewer sales- people still driven by the same pressures to meet sales quotas.
Yes, more highly qualified advisers probably do provide higher standards of advice to clients whose affairs are sufficiently complex to require high- level advice and who are prepared to pay fees for it.
But, set against this, does the FSA have any evidence that advisers with only basic or middle-range qualifications (but decades of experience) routinely formulate inadequate or defective financial planning strategies?
Just what are the indus-try’s glaring defects at which the RDR is targeted? The FSA talks vaguely about raising standards but offers no evidence that the standards of advice provided by most IFAs to most ordinary clients are in any way defective.
Is there any evidence of widespread (as opposed to niche) demand for specifically non-product- related financial planning advice? And where, as always, is the consumer research and the cost-benefit analyses which the FSA claims to undertake as the basis for all its regulatory initiatives? Missing in action, as usual.
Where is the evidence that the industry is likely to be better placed to serve Middle England if there are thousands fewer advisers available to formulate strategies building on what people already have and thousands more “new model” advisers working predominantly on the basis of fees which most ordinary people either cannot or will not pay?
I just don’t see such a landscape as being a better place for ordinary people to access affordable advice.
We know that the FSA reads the trade papers, so perhaps someone from the FSA would be good enough to set out just what better “outcomes” it expects to achieve with the RDR.
Depolarisation has failed and Hector Sants has admitted publicly that his predecessor’s TCF initiative has been a failure, so I think the industry is entitled to know in what ways the FSA expects the outcome of the RDR to be any better. To many, the RDR just looks like more regulation to justify the jobs and salaries of the people at Canary Wharf.
This is an open request to the FSA to publish for all to see, to debate and perhaps to challenge:
1: The evidence of industry failings on which the RDR is predicated.
2: The consumer research on which the RDR is predicated.
3: The cost-benefit analysis to justify the upheaval that the RDR is likely to cause.
4: The “better outcomes” that the FSA expects to see once the RDR has been fully implemented across the industry.