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FCA calls for more feedback on impact of RDR

2 May 2019

The Financial Conduct Authority has issued a call to advice firms to provide feedback on both RDR and FAMR to assess if the regulation continues to meet consumer needs. 

The review poses 24 questions around consumer barriers to advice, quality and choice available, consumer needs, value for money, competition, changes that may encourage more consumers to seek advice and market developments and risks.

The regulator is giving respondents until 3 June to submit their feedback, after which it will carry out additional research with a view to publishing its final review in 2020.

The RDR sought to transform the transparency and professionalism of the advice market when it was introduced at the end of 2012 in a bid to instill greater confidence and trust within consumers. FAMR followed in 2015, with the aim of addressing concerns regarding the availability of advice.

Kay Ingram, LEBC Group’s director of public policy, said it was encouraging that the FCA had acknowledged the progress made in several areas since the introduction of RDR, including training and qualifications, conflicts of interest between adviser and consumer, better treatment of consumer and greater cost transparency. However, she cautioned there was still more to be done.

She commented: “Advice firms still have more to do if they are to reach more consumers with the advice which we believe they may benefit from.  Our priority is to reduce the cost of advice to consumers to make it more affordable. We also see the need to restore consumer confidence in financial services and believe that the development of guidance and advice delivered digitally and via the workplace is the best way to achieve more confident and engaged customers.”

Simon Cowley, adviser at Walker Crips Wealth Management, said both the RDR and FAMR had driven an increase in professional standards and transparency, but echoed the sentiment that more must be done.

“Access to advice is probably the most fundamental consideration facing the industry with a good deal of the population being disenfranchised from financial advice due to the cost. This is due to the higher level of professional standards and regulatory obligations that firms must satisfy in order to provide suitable advice.

He added: “Another major consideration is the ongoing issue with ‘phoenix firms’, where failed advice firms reinvent themselves as claims management companies. Banning this would increase trust and reduce bad practice.”

Steven Cameron, pensions director at Aegon, said the review not only offers the industry the opportunity to assess the effectiveness of regulation to date, but the chance to explore how regulation can best meet the future needs of consumers and advisers.

He said: “We are keen for the FCA to refocus on closing the ‘advice and guidance gap’. Recent measures to protect individuals who don’t seek advice are helpful but enabling more people to get advice would be a better solution. One area where there is a real risk of a growing advice gap is for members of defined benefit schemes where advisers are struggling to obtain affordable or adequate Professional Indemnity Insurance. While a DB transfer is unlikely to be in the majority of peoples’ interests, having a market where only a minority are able to even explore whether it’s suitable is not helpful.”

Cameron said Aegon supported allowing individuals to pay for advice out of the funds within pension and investment products but said a merger of adviser charging and the pensions advice allowance would simplify the process.

Cameron continued: “FAMR introduced the concept of the pensions advice allowance which allows individuals to take up to £500 from their pensions up to three times to pay for broad retirement advice. The RDR had already introduced Adviser Charging which has no limit on amount or frequency but can only be used for advice on the pension from which it is taken. The similarities mean PAA is not widely offered or asked for and we’d strongly support merging the two.”

Aegon also called for the FCA to renew its efforts to move to risk-based FSCS levies for intermediaries and offer greater practical support to employers to grow advice through the workplace.


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