Since its launch in June 2006, the FSA’s RDR has attempted to redefine the distribution landscape for the investment, life and pensions industry both for the benefit of consumers as well as for product providers and advisers. The FSA has sought to involve widespread consultation across the industry, which has led to the production of three major discussion documents on which the survey was taken.
The research, which surveyed senior executives from 130 financial service businesses from the investment, life and pensions industries, was commissioned to understand how the RDR was going to affect their business, the market and consumer confidence.
The key findings of the report are as follows:
1. Consumer needs will not be met:
The majority think that the recommendations are disappointing for consumers. Nearly half (49%) do not believe the proposal will deliver fairer outcomes for consumers; more than half (57%) believe it will not increase consumers’ confidence, and a massive 77% do not believe that the proposal will encourage people to save for retirement. More than half of all respondents (58%) feel that access to financial planning advice will decrease as a result of the FSA’s proposed reforms, while only 8% think the proposal will increase access.
Most respondents do not believe that the RDR, Money Guidance and Personal Accounts will deliver better outcomes for consumers, putting the industry at odds with the FSA and the Government on reforms to the way retail investment, life and pension products are distributed to consumers. 40% think the FSA’s proposals will have a negative impact on competition in the retail investment market, outnumbering those who believe it will have a positive impact by almost two to one.
2. IFAs least satisfied with the RDR:
The biggest critics of the RDR are IFAs. Nearly half (47%) of the smallest IFAs (one-three employees) have not contributed to the RDR and nearly a third of IFAs of all sizes say that they are dissatisfied with the extent to which they have been consulted. Half (48%) are dissatisfied with the proposals coming out of the RDR. IFAs are also less likely to agree that the original objectives for the RDR will be met, and two thirds (64% - rising to 72% among the smallest IFAs) feel that access to financial planning advice will decrease as a result of the FSA’s proposed reforms.
3. Independent advice will only be affordable by and available to the most affluent post-RDR:
Three quarters of respondents agree with the contention that post-RDR, independent advice will only be affordable by and available to the most affluent in society.
4. The industry is supportive of Money Guidance, but will not provide it:
Whilst 78% of all respondents said they are supportive of Money Guidance and its aim to better inform consumers about their money matters, less than a quarter (22%) said that their organisation will be providing Money Guidance services. Only IFAs and friendly societies suggested they would be doing this.
5. Adviser charging expected to lead to a significant loss of consumers seeking independent advice and less IFAs providing that advice:
It was suggested by a significant number of respondents that many consumers will not pay for something which up to now they had regarded as ‘free’, and that many will not want to pay up-front for advice. The majority expected the impact on IFAs to be negative, with firms doing less business, or going out of business altogether.
6. The banks are expected to be the big winners under the RDR, whilst the IFAs will be the biggest losers:
Asked which players in the industry would be the biggest winners and losers under the RDR, respondents identified the banks as the biggest potential winners (mentioned by 68% of respondents) and the IFAs the biggest potential losers (mentioned by 59% of respondents).
7. Raising professional standards is seen as a good thing:
Three quarters of respondents were very supportive of the proposal to create a Professional Standards Board for organisations distributing investment, life and pensions products into the market. Similarly, the great majority, 96%, said they are in favour of minimum professional qualifications within the financial advisory market, and 97% of a system of professional standards and qualifications, including CPD, which mirrors that in other professions like law and accountancy.
