Regulation  

Are advisers ready for FCA to take learning wheels off RDR?

John Lappin

It has been a constant plea from investment advisers throughout the years that they would like a better understanding of what the regulator wants from them.

It is probably fair to say that sometimes the regulator has been better at communicating than at others. But a couple of recent stories, which have been very popular on the FTAdviser website, may not improve the mood.

First, the FCA believes it is now time to phase out its support for advisers concerning the RDR.

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Here is a quote from Rory Percival, the regulator’s technical specialist: “We are now past the supportive stage and saying, ‘You’ve had the rules and guidance; now is the time to see if the industry is complying.’ We will start taking statistical assessments of the market from this week.”

One can understand how the regulator arrives at this view. We are nearly a year in and yet – as I have argued in this column previously – the FCA has effectively extended the RDR with its platform reforms and concerns about inducements, while the Department for Work & Pensions and the Office of Fair Trading have extended the workplace reforms with the edict on consultancy charging and the threat to unwind commission.

Now I would not want to be unfair to the regulator. It is clear Mr Percival believes many aspects of the debates surrounding charging and suitability should be, mostly, settled and he has a point – if narrowly defined.

But can it be a settled picture when inducement concerns threaten the network and support services partners of advisers? When some platforms face a big challenge to their model and when the entire payment system is at risk on the workplace pension side?

The RDR – for a number of reasons outside advisers’ control and even a few outside the FCA’s – is still rolling and some of these issues may have a bearing on recommendations.

So for all this uncertainty, you have to wonder whether most investment advisers would accept this turmoil for certainty in another area, which brings us to the next popular story on the website: that of the FCA’s attitude to whether advisers can rely on information supplied by providers and fund managers.

We hear, admittedly via Chris Hannant from the Association of Professional Financial Advisers, that advisers will not be responsible for checking what are put forward as facts in the literature, although they will have to check that the information is internally consistent and the product suitable.

Does this really pass the Arch Cru test, given the mis-categorisation and the failures of the authorised corporate director?

Advisers would like to see something definitive – a document that spelled out, line by line and item by item, where responsibility lies.

It might help them obtain professional indemnity cover. Indeed, they would trade a lot of uncertainty elsewhere in the RDR process for something concrete in this area.