Prominent industry campaigner Gina Miller has said the Financial Conduct Authority (FCA) has “deferred too many of their responsibilities” to the financial sector and accused them of “feet dragging”.
The co-founder with her husband Alan of investment boutique SCM Direct, was speaking in the wake of her High Court win against the government over the triggering of Article 50, which is necessary for Britain to leave the European Union.
Ms Miller said: “We need a regulator who is going to regulate and should not depend on voluntary codes or systems.
"But year after year we see consultations, reports, recommendations and voluntary codes being issued [from the FCA] and it’s achieved absolutely nothing.”
Acknowledging she was also “very vocal” on topics other than Brexit, Miller added: “Every time this feet dragging occurs there are millions of people out there who are working hard and putting their money away, but it’s not producing the outcomes that they need.”
Miller, who also runs the True and Fair Foundation that targets smarter charitable giving, said “the whole idea is that for consumers to benefit they need a proper functioning market”.
But to achieve that, she said the industry needs to “have different players in it" and a “broad, competitive, well-funded financial services sector”. It also requires a vision, but Miller said “nobody has real vision for real change”.
Ms Miller argued the need for better products, saying "the industry acts more like a cartel” with perhaps “70%” of investment product providers charging the “same fees that are too high and few products that actually very different”.
In relation to the Retail Distribution Review (RDR), she described it as something of a two-edged sword that has “caused a few problems”.
Nevertheless, she noted “one very positive aspect” in that it had led to increases in qualifications that practitioners in the sector had to hold and introduced greater diversity.
“The big negative though is that it [RDR] has made it more difficult to understand what consumers are being charged as fees are split out and there are many different fees. That’s quite different from its intention,” Miller said.
She added: “It was supposed to lower fees. However total fees have in fact increased and resulted in more compliance, which has a cost impact for providers.”
Almost four years since the landmark RDR reforms were initiated in December 2012 to shake up the financial advice market, fee levels have barely changed.
Back then 2.86 per cent per annum (pa) was the average, while today it has been put at 2.56 per cent on £100,000 entrusted to a financial adviser, according to accountants Grant Thornton.
Furthermore, given that the minimum investment level now for many wealth managers to handle client business has risen significantly, Ms Miller added hers to voices on the advice gap between people who can afford advice and those who need it.
Here she cited that the minimum investment level for many private banks, wealth managers and IFA's handling client business is "somewhere in the region of £500,000 to £1m”.
Consequently many individuals who had previously been able to find an adviser - in the £50,000 to £100,000 bracket - are now “not being serviced” or at least finding it hard.
Commenting on the sector as a whole, Miller: “If the industry got things right it would encourage more people to invest. We need a clean out. Yet in many cases today the products the investment and pensions space o offer have not moved on. We need better products, better pricing and better outcomes.”
While SCM Direct’s fees vary according to the current selection of ETFs and levels of trading activity by the firm, their website discloses the total cost of investing at 1.13 per cent pa, which includes an annual management charge of 0.48 per cent.
The FCA declined to comment.
