Financial watchdog the FCA has set out some findings from part one of its thematic review of the RDR.
It is not exactly a terrifying document for investment advisers, but the FCA is certainly continuing to worry about some of the detail.
Among other things, from its look at 50 firms, the FCA has concerns about the standards of disclosure around independence. It has some qualms where payment is contingent on a product – and the risk management around this where the best advice is to do nothing.
To give a specific example of something definitely against the rules, it says some advisers are splitting the adviser charges on lump-sum investments into instalments and that is not allowed.
It is not a damning report and may amount to necessary regulatory tidying up. The FCA is determined to have a grasp of the issues and to be seen to have a grasp of them too.
So what is there for advisers to worry about? Well, the worst thing that could happen would be if we found ourselves embroiled in some sort of rolling RDR with more and more issues brought to light each year. The platform paper, for example, brings another two or three years of uncertainty, and for some advisers a not insignificant challenge to the bottom line.
A regulator can only do something quite as dramatic as banning commission every few decades. But looking back at the past 25 years, it feels like in the retail financial services sector, we have been party to one long-running argument where year by year the terms always shift slightly.
Clearly no debate or change at all is unhealthy too but it would be good if we were getting near something that felt like a settled position.
There are two very important reasons for this, in my view. The first is that advisers need – somehow – to challenge the assumption that more and more costs can be piled on to the sector. Constant change is hugely expensive, not least in management and advisers’ time. The regulator needs to look at ways to ease the cost burden so that the advice sector can grow again.
But the second issue, which has a clear consumer benefit, is that in the midst of complying with all these rules and adjustments to rules, advisers may not be modernising and updating their approach to advice and investment management or not as much as they should be.
These challenges may range from what should you do with the rest of your portfolio when you can pick up auto-enrolled contributions through to what investment approach do you apply to a post-financial crisis investment strategy – and in which all manner of assets are still behaving strangely, to say the least.