In the course of interviews with 30 providers, platforms and distributors, as well as 280 IFA firms, consultancy Mitchell Moneypenny came across three dominant positions on the retail distribution review (RDR)…
The sceptic doubts that RDR will lead to "a tectonic shift" in the advice profession, and aside from a tightening of controls it will be business as usual for many groups...
"In reality the end result will not be purely down to logic and will inevitably be determined by the relative strengths of the commercial and political aspirations of those organisations set to win or lose as a result.
"The last thing the FSA wants is lots of little directly-regulated guys doing whatever business they want with nobody overseeing it and not enough time, money or resource for them to keep an eye on it. And the nationals and networks are not going to take on just anybody as the risk is too great.
"If the lower level IFA can't get PI cover and has a chequered complaints history, then they are out.
"The higher tiers of the professional IFAs and wealth managers on the other hand will be readily snapped up by the nationals. Let's face it, it's a whole lot cheaper for those advisers with no PI or capital adequacy fees to pay and with a central compliance function to do the hard work for them.
"All in all adviser numbers are bound to drop but now the FSA has offloaded some of the regulatory burden on to the nationals' compliance teams it's not going to make much change to most of these ‘New Model' IFAs - they will simply carry on doing what they have been doing.
"Hey presto, the FSA wins; the client benefits as the good IFAs get even better and the providers have to take a back seat as they can no longer bribe the adviser to do business with them. Sounds right to me."
Far from seeing the process as beneficial, the conspiracy theorist sees RDR as "a pincer movement" between the regulator and large distribution groups. They believe RDR will deliver what both want: for the regulator, fewer, more coherent blocks of advisory groups to regulate and, for the distributor, a market in which advisers are more reliant upon their delivery mechanisms...
"The sceptic is on the right lines but he is missing a trick. The fact is that there is much more happening behind closed doors than he realises. If he thinks the providers and platforms, for that matter, are simply going to lie down and let the distributors rule the roost then he has another thing coming.
"Of course they are banging on about everyone going restricted and the IFA sector being wiped out; that's manna from heaven for them.
"They can throw a curve ball on the removal of commission and just throw ‘marketing support' money at the distributors, most of whom they have already bought a stakeholder interest in anyway, to get their feet firmly on the panels and model portfolios and the like.
This article continues...
|Comment||Are you an RDR sceptic, conspiracy theorist or pragmatist?|
More rdr news
Audio / Visual
Advisers and providers gathered at the Grand Connaught Rooms in London on 20 November to celebrate the ingenuity and the graft displayed in the protected product arena throughout the last 12 months. These awards are growing in popularity every year, and our congratulations go to the winners and highly commended.