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A defiant FSA today says it is confident the RDR will increase consumer access to financial advice despite revealing half of small firms had opposed its adviser charging proposals.
FSA head of investment policy Peter Smith says the review will boost consumer confidence in financial services which will, "as a consequence", increase consumer uptake of financial advice.
A number of RDR critics argue one of its central tenets - to create a market for consumers - can not be achieved because a number of its rules will encourage advisers to exit the industry.
In today's Policy Statement, ‘Delivering the RDR', the FSA says although almost two-thirds of respondents supported its adviser charging proposals, half of "smaller" adviser firms opposed the changes.
Under the rules, which come into effect on 1 January 2013, adviser firms can only be paid through charges it has set out and agreed upfront with their clients, rather than via commissions set by product providers.
"The [opposition] was because, in most cases, firms felt they didn't want or couldn't move to a world without commission. To be honest it [50%] is an unsurprising figure.
"A lot of firms feel both threatened and challenged by these proposals. But firms know what they need to do now and they have two-and-a-half years in which to do it. Do I think advisers will [achieve this]? Yes."
Smith also said the reason it had revised upward - significantly in some cases - its RDR cost estimates was because intermediaries and providers now "understand better" the changes they need to make and have factored this in to their individual cost estimates.
The FSA today estimates total one-off compliance costs could reach £750m compared to an estimate of £430m last June. Ongoing costs could hit £205m (2009 estimate: £40m).
For the intermediary market, adviser charging one-off cost estimates have climbed from £72m to a possible £160m while, for providers, one-off compliance costs have jumped from £220m to £385m.
"Costs are up because the industry has given us revised estimates," Smith says. "This applies particularly to the providers who have upped their costs as they have better understood the [RDR] requirements on them.
"The key thing here is that people's understanding of what we are trying to do is getting better as we develop our ideas."
Steve Folkard, head of pensions and savings policy at Axa Life, says final costs will be even higher than current estimates.
"We received information from the FSA to help us calculate the costs of RDR, but with many items still unclarified we could not complete this," says Folkard.
"I think the figures we've seen today are still a fairly conservative estimate and final costs will be higher."
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Never Ending
After 32 yrs of this lot, Lautro, Fimbra and now the FSA I have learnt it will never end. FSA is the Greatest Financial Services gravy train so far. I do beleive the FSA Offices are structurally sound enough to be a car park, but how many attendants they will need is another matter.
Posted by: soon to be out of it
It should be obvious. . .
We don't need the benefit of hindsight. Many potential clients, generally those most in need of advice, won't pay fees in any form and therefore the insurance and savings "gap" will continue to widen. If the mandarins at the FSA lived in the real world they would realize this. Shall we say around 2014 for this policy to be declared to have failed the general population, as well as driving many good and ethical advisers out of business?
Posted by: Howard
MORE FSA MADNESS FROM PETER SMITH
Mr Peter Smith crefully fails to distinguish the type of advice that the bulk of consumers will get. ie THE RDR SEEKS THE DEMISE OF THE IFA AND IS PREPARED TO IGNORE CONSUMERS' REQUIREMENTS FOR INDEPENDENT FINANCIAL ADVICE TO ACHIEVE THIS. Why would they do this? Because they are corrupted by the product providers need to sell and FOIST SALES AND MARKETING COSTS ONTO THE COSUMER -it's a bit obvious to all but the ignorant. The FSA's misguided and ignorant bunch - like Peter Smith are unable to understand comprehensively what they should be doing. They should all be shot. Fortunately, the Conservatives can see this, although they will deal with them more leniently. The FSA dhaven't even got round to recognising yet that theybare also messing with the legal aspects of agency and caveat emptor. ARE THEY COMPLETELY MAD? Or are they just after killing broker exemption to VAT? OR HAVEN'T THEY THOUGHT OF THAT YET EITHER? Step forward the next Oliver Cromwell PLEASE.
Posted by: MICHAEL FORBES BATES
rdr
I think that there some positive issues with RDR like qualifications, maybe a better perception from the general public Things it will not do:- 1) Better access to financial advice, yes there will be for high earners but for people who earn below £30,000.00 the answer will be no the ratioanle is that IFA's will be driven up market. 2) Costs who is to carry the outragious cost of this, yes you are right it is the investor, again. Then they complain about poor returns Perhaps there is an hidden agenda by politicains to reduce the effect of IFA's because we tell the client how it is like the Personal pension account, I will not advise on these things, the cost to PII will probitive
Posted by: roger holloway
Election
if they think this will win votes at the general election they can live in hope. It was mentioned on Radio 2 tonight for all to hear with no option to comment - no mention of the Banks not charging commission or introducing fees. I should imagine that our customers will be even more confused. That's the answer and the end, we will send them to that company that advertises on TV .com - Simples! Yes I have lost it - beyond words.
Posted by: What.........
When will the penny drop......ever?
FSA head of investment policy Peter Smith says the review will boost consumer confidence in financial services which will, "as a consequence", increase consumer uptake of financial advice. When will the penny drop?? The vast majority of people do not go out and buy Life Assurance, Pensions and Investments - fact. I have been in FS for 31 years and my clients have got Life Assurance, Pensions and Investments because I have sold them to them. Less people getting in front of clients = less Life Assurance, Pensions and Investments sold. It ain't rocket science. Our industry is regulated by a bunch of civil servants who couldn't find their own arse with both hands.
Posted by: Soon to be out of it too
FSA - unfit for purpose
After 30-years in the business I feel pretty unappreciated - all my best efforts in trying to reduce the savings gap - well I've had enough. With a 100% fee offering all unqualified advisers will have to ask the question 'will all the studying really be worth it' Smith this call has been made on your watch and I know for a fact you are wrong in your assessment. Does any one else agree that clients are going to be herded like sheep right through the doors of the banks - its an absolute disgrace.
Posted by: Off and leaving them to it
Hot air
A man was taking a trip in a hot air balloon. Realizing he was lost, he spotted a woman below and reduced altitude. He descended further and shouted to the lady "Excuse me, can you help me? I promised a friend I would meet him an hour ago, but I don't know where I am" The woman below replied, "Well, you're in a hot air balloon, hovering approximately 30 feet above the ground. You are between latitude 40 and 41 degrees north and between longitude 59 and 60 degrees west." The balloonist took this in for a moment then said "You must be an IFA." "Actually I am," replied the woman, "But how did you know?" "Well," answered the balloonist, "everything you have told me is technically correct but I have no idea what to make of your information and the fact remains I'm still lost. Frankly, you haven't been much help at all. If anything, you've delayed my trip." The woman below responded, "You must be in the FSA." "I am." replied the balloonist, "But how did you know" "Well," said the woman, "you don't know where you are or where you're going. You have risen to where you are due to a large quantity of hot air. You made promises which you've no idea how to keep, and you expect the people beneath you to solve your problems. The fact is you are in exactly the same position you were in before we met, but now, somehow, it's my fault..."
Posted by: Exasperated me
A Challenge not an Insult
This endless tirade of abuse hurled by disgruntled IFA's at the FSA is getting nowhere. Can I suggest a challenge in place of all the abuse and name calling. Instead of all the pointless surveys and opinion polls with questions designed to produce the required response,the FSA get a few volunteers to give up their secure job and salary and set up a small IFA practice in some rural area. They start from scratch with no client bank of wealthy clients and all the bills and overheads of the normal IFA business. After one year they will report back on how many new clients they have using the new RDR format of charging. This will provide a definitive answer as opposed to endless argument and speculation. If it were to become apparent that a definitive answer was not in fact desirable then the conclusion would have to be that there really is a more sinister agenda attached to the RDR.
Posted by: David McMeekin
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not rocket science
Yes our understanding is getting better smithy! The more your ideas develop, the more it will cost us!We just want to know where it will all end.
Posted by: empty pockets