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Tackling post-RDR problems

Overall I believe the RDR did achieve many of its stated objectives. In particular the ratcheting up of the minimum level of qualification has improved adviser knowledge and thus the quality of advice and consumer outcomes.

I am, however, equally sure the regulator failed to deliver on one of its original goals (that was suspiciously dropped as we got closer to the RDR implementation date): “increasing the number of consumers receiving our products and services.”

Basic advice

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In fact, post-RDR, we have seen a substantial advice gap develop. While this can partly be explained by the withdrawal from the advisory sector of many banks (something that needs reversing as the banking sector is well placed to deliver to the mass market) it is also due to the FCA’s reluctance to introduce product regulation or more flexible approaches to ‘Simplified Advice’. In the past year I have had several meetings with the FCA about Simplified Advice and the advice gap and to the FCA’s credit, the regulator did remind me that Basic Advice is still permitted post-RDR and that it is happy for firms to consider this advice route. While Basic Advice has its attractions I still see it as a retrograde step as basic advisers need no formal qualifications, let alone a Level 4 Diploma. The FCA did push back on this by stating that a robust T&C system would need to be in place and I accept that for many firms this would mean some form of qualification. Indeed the largest firm delivering Basic Advice uses the CII’s Certificate in Financial Planning to demonstrate adviser competence.

Clearly there is an ongoing advice vacuum and although technology-driven solutions are being tried these are unlikely to completely fill the gap. This has led to a number of organisations saying that they will be considering entering the market, the most notable being the Money Advice Service. I am not surprised Mas is looking at this but it would need to balance the fine line between guidance and regulated advice.

Chartered

The ‘advice gap’ isn’t the only post-RDR question. There is a continuing debate about the definitions of advice – independent and restricted – and the ability of firms to meet and maintain ‘independent’ status. As a non-executive director of a substantial independent advisory firm (the Beaufort Group) I am all too familiar with the debate but recently it has taken a new twist with an increasingly wide belief that being independent is now less important than being ‘chartered’. It is therefore timely that the CII has started a formal review of the criteria for chartered firms. I would encourage all firms to respond to the CII’s review – Williams Goddard Consulting Ltd is doing so. The consultation is available on the CII website.

Whatever the outcome of the CII’s review of chartered firms, there is no doubt that individual chartered financial planner status is the gold standard for advisers but for many individuals the achievement of chartered status isn’t the end of their education. This was brought home to me at last year’s PFS conference. Apart from excellent CPD credentials, the conference is a fantastic place to meet old friends and exchange ideas and opinions. However, what really amazed me last year was the number of friends – old and new – who approached me to ask for my advice on continuing their education. Virtually all were chartered financial planners, often fellows, and some with external higher education qualifications (master degrees) too.