RegulationFeb 8 2023

‘RDR split financial services market into two’

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‘RDR split financial services market into two’
John Cowan, interim CEO at Sesame Bankhall Group who appeared on Dynamic Planner's CEO panel at its conference yesterday (February 7).
BySonia Rach

The Retail Distribution Review 10 years ago saw the financial services market split into two, according to John Cowan, interim chief executive officer at Sesame Bankhall Group.

Speaking on the CEO panel at the Dynamic Planner conference yesterday (February 7), Cowan discussed some of the opportunities the industry is likely to see, moving from RDR to consumer duty.

He said: “Consumer duty is going to bring challenges and opportunities and in my mind, RDR broke the financial services community into two: the mortgage brokers and financial planners.”

Cowan explained that financial planners are building asset values for people but the mortgage market is working in transactions.

“Foreseeable harm in the consumer duty is a simple wake up call to any mortgage broker in the country,” he said. 

“Many claim they talk to a client about protection but most clients walk out the door without any conversation because the broker doesn’t have time or can’t be bothered.

“So the opportunity and obligation for a mortgage broker to open up a conversation about protection, which they should have been doing anyway, will be more evident. I see that as a big opportunity for brokers.”

Cowan added that all financial services firms need to go back and “take a good look at themselves” as while many state they are already abiding by treating customers fairly, “there are bigger challenges coming down the road”.

Likewise, Stephen Gazard, CEO of Quilter Financial Planning said the duty presents an opportunity to change the model. 

We’re in a world where it is far easier for an 18 or 25 year-old to invest in crypto than it is to get pension advice. That cannot be right. Andy Thompson, Solomon Capital Holdings

“There's a huge amount we do to protect the adviser and ourselves and the consumer duty provides that dynamic to move away from that risk environment that's driven us."

Time for change

Discussing how people’s plans have changed over time, Gazard said we are in an age of acceleration. 

“The speed with which it's changing around us is at a much greater pace,” he said. “The role of the adviser is to fully embed themselves with the client.

“I think we have become far more reactive to the needs of the clients, rather than ultimately delivering what we think clients want. 

“Actually understanding directly from the client, rather than what we think they need from us, is the change.”

Additionally, the big difference now, compared to 2008, is that the advice given is a lot more sophisticated.