RegulationOct 21 2015

FCA’s Percival says ‘Thank God for the RDR’

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FCA’s Percival says ‘Thank God for the RDR’

Rory Percival, technical specialist for the FCA, has said we were fortunate the Retail Distribution Review requirements came into force before savers were given greater access to their pension pots.

Speaking at FTAdviser’s Retirement Freedoms Forum in Harrogate, Mr Percival said the RDR rules, by axing commission for advisers, effectively removed “conflicts of interest around giving advice on pension freedoms.”

A packed room of more than 90 advisers at FTAdviser’s event yesterday (20 October) afternoon heard Mr Percival say: “When the pension freedoms came in thank God we had the RDR.

“If you envisage a world where we were still in a commission, transactional (world), where you only got paid as an adviser if you undertook a transaction... It was much more around transactions than it was giving advice.

“For pension freedoms, and the conflicts of interest around giving advice on pension freedoms, we would be in a very different place (without the RDR rules) to where we are now.

“The RDR, and the increasing professionalism of the advice community, has meant, in my personal opinion, the advisory community is in a much better position to get the right outcomes for consumers in the new pension freedoms world.

“It was very fortunate that it worked that way round.”

The Retail Distribution Review requirements have been in force for almost three years while pension savers have only had greater access to their pension pots since early April.

When quizzed on whether the Financial Advice Market Review, which sees the FCA and HM Treasury tasked with looking at ways to mend the advice gap, will result in unwinding elements of the RDR, Mr Percival said: “FAMR is a very, very open discussion piece about how this (at-retirement advice) should work going forwards.

“We haven’t got to any conclusions as to what that might look like yet. Whether it will include group schemes or whether there will be other policy changes, it is not up to me to give any indications in that respect.

“What I would say is if you have a particular view on that (then) take a look at FAMR.

“If you have views about how things should work, it is a little bit like voting, you have only really got a say in how the country is run if you have got a voting right. So, I think it is really important that you do feed into the FAMR review.”

When quizzed by an adviser about whether anything could be safe harboured as a result of FAMR, Mr Percival said he would not rule anything out at this stage.

He said: “It is quite early. One of the areas that has been talked about a lot is the liability side of advice. I think it is very unlikely that our rules will come to any conclusions without looking at the liability side.”

The Financial Advice Market Review input paper, which was published last week, proposed a long stop for adviser liability and questioned whether robo-advice could mend the advice gap.

In recent years the FCA reported it had seen a decline in the number of financial advisers offering professional advice - from around 26,000 in 2011 to 24,000 in 2014.

Advisers have until 22 December to give their feedback to the Financial Advice Market Review input paper.

You can read a summary of the paper by clicking here.

emma.hughes@ft.com