Two senior Financial Conduct Authority executives have dismissed suggestions the RDR reforms may not have yet translated into better outcomes for consumers, saying its post-implementation review highlighted key improvements which will have enhanced advice services.
Europe Economics’ final ‘phase 1’ report on the impacts of the RDR, published today (16 December), stated that while the RDR’s core objectives have been met, there was not yet evidence of an overall fall in costs or of consumer benefits arising out of the new rules.
It did, however, point to key policy successes, such as the move away from commission-paying products which the authors say points to bias being removed, a move to professionalism and even advisers exceeding the minimum level four requirement, and downward product price pressure.
Speaking to FTAdviser, David Geale, head of FCA policy and the man often credited as the architect of the RDR, said it was “early days” and that there are “encouraging signs” the rule changes have benefited consumers.
He said: “It will take time for them to fully bed in, but the pattern of product sales have changed. We have seen changes to product fees, different services so there are changes to adviser charges.”
Nick Poyntz-Wright, the regulator’s director of long-term savings and pensions, added that NMG consumer research carried out with over 1,000 respondents, published alongside today’s reports, also painted a positive picture.
“The research does show quite clearly that consumers trust the adviser that they have chosen and they value the advice they are getting. What is less clear is whether they understand precisely what that service entails and exactly what it is costing them, but those would be the signs of a more mature marketplace.
“None of us really would have expected at this stage that the consumer would actually be able to explain the ‘ins and outs’ of RDR; standards have improved and the consumer feels they are getting a good level of service from an adviser that they trust.
“These are indicative findings as it’s a longer journey.”
The post-implementation report found charges for retail investment products have been falling post-RDR, although it also found evidence that the cost of advice has increased. In some cases this more than offset the decreases elsewhere.
When it comes to the total cost of investment or the benefit to consumers from the advice received, the report notes that “the evidence does not yet enable us to draw firm conclusions as to whether this has changed post-RDR”.
Mr Geale added: “[Adviser charges] may not have gone down, some have possibly gone up, but equally we see changes in services to reflect that, so that is one area where it is too early to tell to see the total charge.
“But we see differences in products, in professionalism, and all that is for the benefit of consumers.”
He also emphasised that it is still “early days” and the FCA was not expecting to achieve everything it set out to achieve by this stage, “but it’s the right direction of travel.”
Regarding product sales, Mr Geale said that due to the commission ban, different products are being sold which may have been overlooked pre-RDR due to no or lower commissions.
“That overall has to be a benefit to consumers. We see competition within the platform [market] - plenty of examples of platform comparisons where you can see what the cost is to use a platform for different types of portfolios.
“It enables people to make a more active choice.”
Mr Geale also said that advisers have gone above what was asked of them, as over a quarter of people have gone beyond chartered or certified status.
“I think that must be a real positive to the industry and real benefit to consumers in terms of the advice that they get. We can’t necessarily demonstrate yet that it has flowed through into suitability, but overall we are painting a positive picture.”
donia.o’loughlin@ft.com
