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Will the FSA face up to the RDR?

Many years ago, when I started out in journalism, my first news editor was prone to shouting and swearing at supposedly errant staff in full view of all their colleagues in our open-plan office, sometimes reducing a few of them to tears.

The lesson I learned is that the more you rant at people, the more frightened, paralysed and error-prone they become. I say all of this because I wonder whether a panic-stricken response to being restructured is affecting the FSA in the same way.

A report on Money Marketing’s website indicates that the regulator appears unable to make up its mind as to whether it wants to introduce the retail distribution review after all. Last year, the Conservatives announced that if they won the election the regulator would lose large chunks of its current remit.

Several observers pointed out that by announcing such a root-and-branch reform of the FSA, the Tories risked weakening its ability to intervene in a coherent manner on a range of regulatory issues between now and when key areas of its current work are handed back to the Bank of England.

Could the possible scrapping of the RDR be a sign of growing internal paralysis in response to yet another regulatory reorganisation?
It might. Last week, Lansons director of regulatory consulting Richard Hobbs told a conference in London the FSA “considered scrapping the

RDR at a board meeting in March but decided to push on with plans for fear of losing face”.

Hobbs claimed: “I have to say, it only just survived an executive committee meeting in March at the FSA. The FSA are not particularly proud of the RDR but it is a question of losing face, so I think they will carry on.”

This statement is dynamite – a fact clearly recognised by IFAs who read the story. Over 40 comments quickly appeared, none of them particularly favourable to the RDR.

It raises the obvious question as to why the regulator is prepared to proceed with something many IFAs regard as detrimental to their interests. If the only reason is “fear of losing face”, then the regulator really is up the creek without a paddle.

There is no doubt that Richard Hobbs is a man with an immense experience of the industry. Before joining Lansons, he ran a regulatory consultancy for almost eight years, has worked in the insurance directorate of the Department of Trade & Industry and was head of life and pensions at the Association of British Insurers.

I spent many hours last week and over the weekend talking to numerous people about this story, several of them with good connections inside the regulator.

What I’m hearing is that, yes, the regulator’s internal discussions recognise the RDR proposals will affect the number of consumers able to obtain independent financial advice in future. We all know why that might happen, so I won’t discuss it here. It is also true that these issues were discussed in the spring but there never was any doubt the RDR would be implemented.

To understand why, you have to understand how consultants like Richard – and journalists – arrive at their conclusions. There are two main ways: the first is to base them on a direct piece of information. For example, if someone senior within the FSA tells me the RDR is going to be scrapped, that is usually a definite indicator that something is going to happen.

Equally, when people talk to us, they almost always have a motive for telling us something, so even supposedly cast-iron information may not be exactly correct.

The second way is to become skilled at reading policy documents and speeches by various key individuals, and seeing if there is a pattern that allows us to reach particular conclusions, if only tentatively.

It is this second method that Richard told me he used to deduce that the FSA executive meeting discussed the RDR, that there were significant doubts as to whether it could deliver genuine consumer benefits but it was nonetheless approved, albeit half-heartedly.

In other words, I believe he bases his statement on his interpretation of parallel speeches and documents that have appeared at the same time. Sometimes that can leave you open to making a wrong interpretation, which is what I think may have happened here.

Nic Cicutti can be contacted at


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. Vanity has a high prize indeed.

  2. John Blackmore 23rd July 2010 at 9:54 am

    I agree. Fora long time now the FSA have been like the rabbit in the headlights. which bit of the nonsense do they undo first ? how can anyone admit to being so wrong, in so many ways, and for so long ?

    No far better to batten down the hatches and full steam ahead.

    How does the old saying go ? ” If you have half a mind to work for the FSA that’s all you’ll need”.

  3. Regulation of the Financial Services Industry has always been paid for with industry money, therefore the regulators have no concern for cost for they pay from a bottomless pocket.

    The current RDR game for that is what it is, is the product of as is many of the problems confronting the FSA, a bottomless pocket.

    Bottomless pockets generate empires, which have to be justified, hence the problems at the FSA.

  4. Has anyone at the FSA ever stopped to think of the people with Cefa who have been unable to get a job in this industry?

    No trainee positions & No jobs without CAS & then this… More exams, more expense & all to save face!

  5. I actually agree with some points of the RDR… a few moments ago I spoke to a lady who had been told by the pension specialist over her divorce, that he wouldn’t charge her anything for the advice…rang me firstly to ask if I charged anything….

    Obviously when I explained that as none of us are paid by a great IFA benefactor up in the Sky that instead of doing it for nothing the adviser involved actually may be paid a commission for taking the open market option on the pension sharing order…she then softened her stance and wants me to sort the work out for her that clearly hasn’t been done!

    So I do agree the RDR will be good for making matters more transparent…

    However what is galling is the fact that the banks are going to benefit from this the most because everyday clients will still perceive their so called advice will continue to be free!!…It will simply mean even more business as usual for the banks & that sickens me!

  6. Finally, it is good to see a journalist who understands the issues and can see this for what it really is!

  7. It could be that there is uncertainty about commitments which will fall to the new regulatory bodies to implement. How can the FSA know what will transpire when the relevant legislation goes through Parliament or the new Boards get to grips with RDR issues.

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