If an outcome of the Retail Distribution Review is that financial advice will become the preserve of the wealthy then the RDR will have been a complete failure, Ken Davy, chairman of SimplyBiz, said.
In an interview with FTAdviser, to be published later today (23 March), Mr Davy admits that one of his fears is that this will be an unintended consequence of RDR and says the FSA should be nurturing the IFA community.
He said: “The RDR should be about encouraging access to more people for savings, investments and protection products.
“Indeed, one of its first six objectives, five years ago, was to increase the availability of financial advice and that objective was quietly and disgracefully dropped about three years ago.
“Quietly and disgracefully because there is no doubt in my mind that the RDR, as it is today, will not increase the availability of financial advice.”
Despite fears among advisers of the post-RDR world, Mr Davy believes that IFAs can tackle this by delivering value, emphasising that it is all about relationships.
He said: “With a financial adviser, whether restricted or independent, they are building businesses in the community, they are serving the community and they grow old with the family of the client.
“It is the relationship and that is why the IFA sector in particular has proved to be much more successful than people have ever imagined.
“I remember in 1991 when commission disclosure came out and at that stage the IFA sector had about 29 per cent of the market share and commission disclosure came out for IFAs about five or six years earlier than for banks and insurance companies.
“Nonetheless, in the next decade, we saw the IFA market share more than double and now it’s 65 to 70 per cent or even more.”
Mr Davy believes this is because the IFA sector is “delivering high value to the community it serves”, pointing out that the RDR “really should be focused on how we should extend that”.
He highlights data from the Financial Ombudsman Service, which showed complaints to the ombudsman regarding IFAs are low, less than 2 per cent.
Mr Davy said: “And it is not just the percentage... it is the number in absolute terms. If you actually break the numbers down it means that the average IFA, as an individual, receives a complaint probably about once every 10 years and the chances of that complaint being successful are not high, as over half are found in favour of the adviser.
“What that means is that in a career of 20 to 40 years, an IFA might have one upheld complaint against them so that is not a sector that causes huge consumer damage and consumer detriment.
“So, again, the RDR in many cases has been facing in the wrong direction - it is overly complex and overly costly but nonetheless it is here, it will happen and it’s really important that we all knuckle down and make sure we are ready for it.”
