Opinion  

FCA admits to RDR errors, but where to from here?

Donia O’Loughlin

So this week we learned that the Financial Conduct Authority can’t quantify the advice gap and that the independent and restricted definitions are not working. Tell us something we don’t know.

Before the introduction of the Retail Distribution Review, the industry was warning that a consequence of the new regulatory regime would be that some consumers would no longer be able to access advice as they would not be able to afford it.

Did the FCA listen or take concerns on board? No.

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At a roundtable this week, FCA head Martin Wheatley revealed there are consumers who are not getting advice that may have done prior to the introduction of the RDR. He also said this issue remains the biggest challenge for the regulator as it is struggling to quantify the perceived advice gap.

We have been writing about the advice gap for at least three years, although the term “advice gap” did not come into common parlance until late 2012. We have an advice gap and a savings gap in the UK which feed off of each other.

Earlier this year, FTAdviser revealed that IFA James Williams has launched an online proposition aimed at lower value clients. The following week, FTAdviser also revealed that IFA group Penguin Wealth has launched the first of four websites, the first of which is aimed at pensions.

This highlights that advisers are attempting to tackle this issue. What is the regulator doing?

Get rid of the term restricted

Speaking at the same roundtable, Nick Poyntz-Wright, FCA director for long-term savings and investments, said there was still a lack of clarity over the new definitions and that the FCA would be ”redoubling” its efforts in the coming year.

Martin Wheatley, the chief executive of the conduct watchdog, also admitted there was more work to be done on clarifying the definitions but that it would not be seeking to change the rules.

Well knock me down with a feather. Ever since the term ‘restricted’ came in, it has been criticised because it implies an adviser is restricted, that is to say not as good as independent. Never mind the fact that it just sounds rubbish.

Why couldn’t advisers just have the simple terms they had before. Did this really need to change?

Restricted has a negative connotation yet, somewhat bizarrely, more and more advisers are moving from having an independent proposition to having a restricted one because they are afraid the independence bar is too high.

One year on from RDR implementation, you would have thought the regulator would have worked that out before this week. More critical is the question, again, of what they will no do, especially as it has said a U-turn is not on the cards.

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