AIFA: RDR must not force good firms out of business

AIFA has issued a stark warning the costs of the RDR proposals risk the financial stability of many adviser firms, already suffering from the impact of the recession.

In its RDR Manifesto, the IFA trade body says no good firm or adviser should be put out of business by ‘arbitrary dates’ imposed by the regulator.

The Manifesto reads: “We believe that the costs of the RDR proposals risk the financial stability of firms given the economic environment. We call on the FSA to reconsider the transition period, and cumulative cost of current regulatory interventions. A new and more detailed cost benefit analysis is needed.”

AIFA renewed its call for the regulator to reward firms that invest in their business and its people to deliver RDR outcomes.

“To mitigate the costs of regulatory change we wish to see regulatory
dividends introduced which deliver lower regulatory fees and offset capital
requirements.”

It says the FSA must approach the introduction of the RDR mindful of the turmoil that has swept through the UK economy and a pragmatic approach is vital to ensure advisory firms do not leave the industry and consumers subsequently lose access to independent advice.

Chris Cummings, director general of AIFA, says: "The RDR makes sweeping demands on the financial services industry, and the professional advice community in particular. And while we support the drive towards higher standards of professionalism, we are concerned that the current proposals will not meet the original objectives of the reform.

"There is a danger that the implementation of some of the proposals by the current deadlines will lead to fewer consumers being able to access independent, financial advice - and those who do will have to pay considerably more for it."

AIFA says it also remains unconvinced the FSA has the power to introduce many of its proposals, with some running counter to existing and proposed European regulation. It urges the FSA to develop these proposals in conjunction with the EU at a more appropriate pace.

It says a smooth transition to higher professional standards serves consumers well but work based assessment and vocational training must be recognised as being equivalent to qualifications.

AIFA also believes membership of any professional or trade body should be
optional.

“The creation of a professional standards board may prove useful
only if it is attuned to the needs of the industry, its powers reach to the
highest levels of all firms, and it is cost justifiable. We do not need second
tier regulation.”

On Adviser Charging, it warns the proposals can only be delivered with the full engagement of the provider and investment management community and the FSA must not impose ‘half a solution’ on the market.

It wants the impact of the RDR proposals to be clearly measured in terms of increasing consumer access to advice, through the introduction of publicly recognised Critical Success Factors.

Finally, AIFA wants the FSA to commit to a date for its Post Implementation Review,
and invite the National Audit Office to conduct a value for money audit of the RDR. This is to ensure lessons can be learnt about the effectiveness of regulatory interventions.