Conservative peer Lord Howard Flight has warned the RDR will result in advisers losing interest in serving clients with less than £100,000, and attacked the FSA for failing to understand people are not prepared to pay for advice.
In a letter to the Financial Times this weekend, Flight (pictured) says the FSA is “hell bent” on the RDR’s commission ban, despite the detrimental effect this will have on access to advice.
In the letter Flight says: “The rich will be affected little; they have the resources to pay for advice.
“But financial advisers will not be interested in those with savings of the order of £100,000 or less who I doubt will be willing to pay fees out of after-tax income, of the order of 1 per cent or 2 per cent per annum. The net result will be many fewer people getting any financial advice.”
He suggests a better approach to financial advice reform is what is happening in Germany, where IFAs are allowed to opt out of a commission ban with their clients’ permission.
Flight adds: “The problem with the Treasury and the FSA’s elitist attitude here is they do not appear to understand ‘the man in the street’ is not willing to pay what would be significant regular fees out of after-tax income when frequently no changes are being made to their holdings.
“The message is clear – give up bothering to save.”
Last week Money Marketing reported Flight is tabling an amendment to the Financial Services Bill which would scrap the Financial Conduct Authority’s new powers to publish early warning notices.
He claimed the powers, which would allow the FCA to publish details of firms or individuals that are subject to ongoing enforcement investigations, amounted to “lynch mob justice”.
Attain Wealth Management managing director Gordon Crothers believes there are viable models to deliver advice to those with less than £100,000.
But he adds: “Unfortunately whilst I do love this job, I do not just advise for the fun of it and I do have to make a living. Sometimes I think the FSA forgets that.”