Many people ask me what new business opportunities arise from the RDR. I tell them the same thing – very little, whether you are an advertising agency, a freelance consultant or a compliance expert.
The story is different for IT contractors and website builders. Huge budgets are being allocated to streamlining processes to enable more efficient product distribution through the internet to be in place by the end of the year.
The main opportunity for marketing agencies at a mammoth cost to product providers and distributors is the reprint of all literature to change an S to a C or the Financial Services Authority to the Financial Conduct Authority as the lead regulator. What a waste of money.
We have also got the key investor information documents to replace key facts. It is the same information written for the investor but in a different order and includes a simple risk chart. I despair about the waste of tons and tons of paper, which could be avoided.
It is not just suppliers that are trying to remain busy. Financial advisers are being hit by a reduction in client investment business as markets head south, the euro explodes and investors run to the safety of fixed-income and strategic bond funds.
The latest IMA figures show that Isa sales are at half the level of the previous two years, with no immediate indication of an upturn.
What good is increased regulation doing? According to Merrill Lynch Portfolio Managers, the amount of time managers spend on keeping up to speed with regulatory changes has increased from around 10 per cent to 70 per cent in the past 15 years.
With all this increased time dedicated to regulatory change, is consumer trust in financial services lifting? I hate to say but no. The KPMG website states an estimated 25 per cent of people in the UK do not trust banks.
Banks have always held high values in brand perception – they are expected to always do what they say they will. Many people have the idea that they should trust their banks and building societies more than a local adviser.
But the choices for receiving financial advice in bank branches are dwindling. Barclays was the first to announce it is to no longer provide branch bank advice while HSBC has confirmed it will be scrapping its tied advice arm. These are two of the UK’s biggest and most trusted financial services brands.
Where a financial advice service does remain, whether simplified, restricted or independent, the banks will need to charge fees which may be even higher than small whole of market advisory firms. It is a shame that the mass market’s choice for financial advice is reducing. The FSA currently regulates 8,000 firms. I expect this number to drop to 7,500 by mid-2012 and to 7,000 by the end of 2012.
Linda Woodall, one of the few senior FSA staff remaining (that I have heard of), last month told us that the RDR was about “making consumers more confident about getting advice and trusting what you tell them”.
With fewer firms around, simplified advice off the agenda (hopefully temporarily) and companies spending vast amounts of time just keeping up with regulation, there will be fewer opportunities for the consumer to find quality financial advice, never mind expecting the consumer to trust the advice and the financial adviser.
Kim North is director of guidetoadvice.co.uk