We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

In association with

Home > Opinion > John Lappin

Pitfalls in regulating DIY investments

The growth of execution-only investments is an obvious consequence of the RDR

By John Lappin | Published May 28, 2012 | comments

The growth of execution-only – in other words, DIY – investments has always been an obvious consequence of the RDR.

Inevitably many investment advisers will wish to keep up contact with their clients in the early phase of their financial lives, when they are still accumulating capital. New regulation, however, has made that much more difficult and costly to achieve.

Simplified advice – the most restricted form of advice under the regime – looks like the dampest of squibs, for the simple reason that it sounds very much like full advice and, thus, must be roughly as expensive to deliver. For these reasons and more, execution-only services certainly look to be at least part of the answer after 2012.

We should not lose sight of the fact that the more ways in which people can save and invest, the better for individuals and society

The situation has made regulators nervous because they fear that some advisers will get it wrong.

FSA technical specialist Rory Percival has apparently questioned whether firms are disclosing the facts appropriately and clearly to customers. He said clients cannot claim that they have not received suitable advice if they lose money on products on which they never took advice on in the first place. This makes proper disclosure all the more important.

The other warning came from the Financial Services Consumer Panel in a recent paper on the RDR: “We have been concerned that consumers may increasingly be offered ‘execution-only’ services.

“While for many this will be absolutely right, for some it could lead to poor choices and poor outcomes. The banks may readily step in as a natural access point to this market, but given their past behaviours, we have not been convinced of this as a solution so far.”

As the panel points out, IFA businesses are not the only place where things could go wrong.

In fact, a host of organisations are looking to execution-only. Inevitably these include some banks and many IFAs. But it also includes the comparison supermarkets which must be casting their eyes over the RDR and wondering to what extent they can benefit.


The big driver in all this is the RDR, but it is certainly not the only one.

The internet has revolutionised things in the past decade but it has been as much about a revolution in behaviour and attitudes as a revolution in technology.

For example, a decade ago many advisers felt it unnecessary or unwise to give clients online access to too much information. Now it is practically a basic requirement.

The growth of execution-only has to be seen as part of this trend. It also seems quite strange that advisers have been happy to watch Hargreaves Lansdown grow bigger without some sort of riposte.

Page 1 of 2


Our Columnists

Emma Ann Hughes

Emma is editor of FTAdviser and has previously worked for Investment Adviser, Financial Adviser and edited Mortgage Adviser.

Jeff Prestridge

Jeff has been personal finance editor of the Mail on Sunday for a number of years. He writes on a range of subjects and has been a columnist at Financial Adviser since 2004.

Dan Jones

Dan is editor of Investment Adviser and has been a financial journalist for the past nine years. Most recently news editor of a retail fund management publication, he is a previous recipient of the Investment Association's Trade Journalist of the Year award.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

Tony Hazell

Tony is a freelance financial journalist, having been editor of Money Mail at the Daily Mail for a number of years. He has been writing a column in Financial Adviser since 2005.

Most Popular
More on FTAdviser