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Does RDR prove FSA is still not first for purpose?
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| The future of free financial advice, outsourced to Nigeria? |
What is RDR? It is a change in the whole structure of the Independent Financial Adviser market in in the UK. After several scandals around endowment and pensions mis-selling, the regulator decided that two things needed to be done. The first was to make advisers take harder exams to become ‘RDR’s’ so that the lever of advice offered was better. The second element though was to change how IFA’s made money, now they would have to charge fees upfront rather than taking commissions – this change is a real problem for the industry.
The best comparisons I can think of are free phones and free banking. You may pay a little for your mobile, but most o the money is recouped by the provider through monthly charges. With Banking, our accounts are free, but hidden charges on overdrafts and poor interest rates help the banks make that up.
As we know from the Internet world, once something is perceived as free, any attempt to charge for it generally fails. But thee Government and its public sector advisors see commission as a bad thing per se and are happy to ban it; even the EU has not gone down this road.
Unsurprisingly, IFA’s are up in arms about the regulatory changes, they way they need to record their dealings is now more process driven, so they are spending lots on new systems, plus their future business model is a tricky one making the case of investment challenging.
Personally, I have never paid anyone for financial advice, but I know plenty who do – if though the payments have to now be made upfront instead of ‘hidden’, will people want to pay? Maybe, maybe not, we will see. It is a huge change to a huge industry.
Clearly, people resent middlemen in general taking cuts and there is a good case to make that Financial Institutions and Banks have taken too much of a cut int he past few years, helping to create our economic disaster zone of an economy. But the principle of taking a cut is a good one, it is how the world works and provides the link between service and payment.
The FSA here is, as usual, failing to understand that its new rules will end a whole way of doing business – or perhaps it does not. How are these regulators qualified though to decide on entire industry business models, what industries have they run - plus where does it go next? No introduction fees for Funds and Investments at all – a move to people having to seek free advice with the diminution in quality that this entails?
After all, what sort of so called non-advice institutions may step in to help people in this brave new world of financial advisory services - why the main retail banks of course, the source of all the mis-selling scandals in the first place….
2012-09-11 02:24:26
Source: http://www.cityunslicker.com/2012/09/does-rdr-prove-fsa-is-still-not-first.html
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