Years after the fact the reasons things are done are simply the result of one or two letters or, in the case of RDR, three.
Lost in the weeds of acronyms and acceptance that this is just the way that things are done now is, I think, an understanding, or at least reflection, of what had to change and the net effect that has had.
Views on the success or otherwise of the Retail Distribution Review are mixed. For some, the introduction of RDR has only resulted in a widening of the advice gap, disincentivising individuals to seek out advice given the front loading of costs, which many mainstream clients consider to be unaffordable or unnecessary.
For others, the increased levels of professionalisation – added to the net effect of driving poor actors out of the market – have only strengthened their own businesses. Of course, it can also be the case that both are true.
It would be reductive to lay the widening of the advice gap solely onto RDR.When addressing the primary criticism, it is of course true that fewer people are able to access financial advice with many put off by the cost of doing so.
We have unquestionably seen a widening of the advice gap and this, allied to the government’s freedom and choice reforms of 2015, represents a significant challenge to the next generation of retirees who typically will not have the level of wealth and assets that advised clients have today.
It would, in my view, be reductive to lay the widening of the advice gap solely onto RDR. It is inarguable that the cost of receiving advice represents a barrier to some – an issue identified by the Financial Conduct Authority in its recent simplified advice paper.
But it is also the case that wages have remained stagnant for the best part of a decade and avenues to build capital for younger generations have been limited by domestic and international events.
From a professionalism perspective, it is tempting to characterise the advice market pre-RDR as a wild west of unprofessionalism.
The reality is that even before the RDR reforms were introduced, many advisers were undertaking serious self-improvement and seeking to gain qualifications through external professional bodies.
However, it is clear that the industry has taken significant steps forward in this regard. Available data on both net customer satisfaction as well as the number of complaints points to a clear improvement in professional standards.
The vast majority of those directly affected by these reforms will look back on where we were and where we are today and draw at least some satisfaction from it.There is an analysis of the RDR that is seldom discussed. While the RDR was ultimately about increased professionalisation and a raising of standards, it is also a story of empowerment.
The true story of the RDR is that it provided advisers with the keys to escape from an unconscious bias that guides us all.
In a world of commission payments the likelihood is that people were more likely to be guided towards manufacturers and providers who bluntly make it more worth their while.
What the ban on commission ultimately did was open up the market entirely for advisers to be able to build and execute strategies for clients based on a holistic understanding of the market as best fits the client’s needs.
The utility of advice became more about the support and journey advisers would take clients on, rather than the fundamental sale of products to them.
Let’s be clear, a ‘sale’ is still a fundamental part of the industry but the real value that the RDR delivered was the evolution of that role towards holistic support.
Ten years on, it’s fair to say that the impact of the RDR has been largely positive.
What we have today certainly isn’t perfect and other issues have presented themselves since.
But I think the vast majority of those directly affected by these reforms will look back on where we were and where we are today and draw at least some satisfaction from it.
Simon Harrington is head of public affairs at Pimfa
