Labour Shadow Treasury Chief Secretary Angela Eagle believes the changes being brought in under the RDR are broadly right and will restore trust in the advice industry.
In an interview with Money Marketing, Eagle says that without trust, the sector will struggle. She says: “I think overall the direction of change is the right one for the industry, particularly to rebuild trust after all the misselling scandals. Without trust, the industry is on a losing streak anyway. The FSA is trying to focus the industry back on its customers.”
Eagle acknowledges concerns over an advice gap left by the RDR but says “less advertising, more information” on products should reduce the need for advice in the mass market.
She says: “If you are operating in a system where greater access to information has been achieved, the requirement for advice on every product would hopefully lessen because people could see clearly what they are being offered and the price of it.
“I think it was particularly invidious when commission charges and hidden charges were influencing advice or at least colouring it.”
Earlier this month, Association of British Insurers acting director of life and savings Helen White said the Parliamentary debate had “no chance” of changing the RDR and was “purely political”. Eagle says the driving forces behind the debate, Conservative MPs Harriett Baldwin and Mark Garnier, need to realise it is “the end of the process, not the beginning”.
She says: “These Tory MPs are newly elected so I do not want to impugn their motives. That does not mean to say any MP ought not be able to raise issues but I think they need to realise a great deal of work has been done in this area.
“This has been going on since 2006 and the FSA spent two and a half years reaching out to all of the people who are players in this area.”
Eagle says she is concerned that the switch from a monolithic regulator in the FSA to the twin peaks approach will see supervision suffer.
She says: “My worry about the changes is they will cause a period of reorganisation and bits could fall through the gaps and people take their eye off the ball and you see a lessening of vigilance. The need for vigilance in the market never diminishes.”
Eagle, who was pensions minister under Gordon Brown, says the Government’s plan to provide a flat-rate pension is theoretically desirable, but difficult to achieve.
She says: “It is a very neat solution in theory but the devil is in the detail of how you get from here to there and that is before you talk about whether £140 is high enough.
“I do not see how you can do it without getting rid of contracting out for occupational pension schemes, having a long hard look at pension tax relief and a range of other subsidies that currently apply across the board.”
With a raft of reforms under way, from Health Secretary Andrew Lansley’s “deconstruction” of the NHS to the welfare system being “up in the air”, Eagle says the Government is taking on too much at once.
She says: “They are not thinking clearly enough about how different processes of change can sometimes combine and create capacity problems.
“They have all gone off and read Tony Blair’s biography and they all think they have to run out of the starting gates as quickly as possible.”