Treasury committee chairman Andrew Tyrie has criticised the Retail Distribution Review for causing “serious problems” in the advice market.
Yesterday (14 March), the Financial Conduct Authority published the long-awaited report on its Financial Advice Market Review.
Mr Tyrie said the report makes it clear a large number of people do not have access to adequate financial advice, namely caused by a huge cull in the number of financial advisers.
He said the Retail Distribution Review was largely responsible for this, causing adviser numbers to fall to 31,000 in 2014 from 40,000 in 2011.
Mr Tyrie said: “Many firms are cautious about giving helpful support and guidance to consumers on the grounds that the cost and reputational risk of deeper engagement with the regulators are too high.”
Mr Tyrie said as a result firms are inhibited from developing innovative, cost-effective methods of providing advice to consumers.
The FAMR report set out a number of RDR requirements which could be altered.
While the Financial Advice Market Review did not conclude the requirement for retail investment advisers to hold QCF level four qualifications was unreasonable it accepted more could be done to support the next generation of well-qualified advisers.
It therefore suggested the FCA consults on modifying the time limits for employees to attain an appropriate qualification in it existing training and competence sourcebook, allowing employees to work for up to four years under supervision to obtain an appropriate qualification.
Mr Tyrie said: “Those on lower incomes may be put most at a disadvantage. The report makes a number of proposals to address these serious problems in the advice market.
He said these proposals are “a good statement of intent”.
“Whether they turn out to be more than that is something on which the Treasury committee will keep a close eye.”
Mr Tyrie’s comments came after acting chief executive of the FCA Tracey McDermott acknowledged the Retail Distribution Review led to banks leaving the sector, making it harder for the less-affluent to seek advice.
Ms McDermott said: “The tied advisers that used to be within banks - those sales forces have shrunk massively, a lot of them were closed down partly as a result of the Retail Distribution Review and also because the banks realised they weren’t able to control them properly.
“We have started to see those sales forces be reintroduced.
“We would like them to be reintroduced but we would like them to be reintroduced in a way where they are actually clear as to whether they are giving advice, whether they are selling to you and making sure there are appropriate controls around the way that the products are sold and the way the advisers are remunerated. It needs to be done cautiously and carefully.”
katherine.denham@ft.com
