Magazine Issues » February 2014

ASSOCIATION COLUMN: Is the RDR meeting its objectives?

Chris-HannantSince the beginning of last year, the UK advisory sector has undergone considerable change as it implemented the retail distribution review (RDR).

During this time we also saw the regulator, the Financial Services Authority (FSA), split into two new organisations, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Advisers fall under FCA regulation.  

In the run up to the RDR, the number of advisers across all distribution channels dropped significantly.

Not only did we see a fall in the numbers in our own sector, but the banks were also hit as they struggled to implement the business models required in the new world.

We have seen a slow increase in adviser numbers throughout last year, a trend that we anticipate will continue.

A hurdle now is to get new blood into the industry and to ensure that consumers have access to advice – but not just for higher net worth clients.  The challenge will be for firms to offer a viable service to clients with fewer assets, too.   

We will not get a full picture of the overall impact of the RDR on business until 2014, when we obtain the first year of data on profitability, turnover, and client numbers.  

The FCA will be conducting a post-implementation review starting this year to determine if the RDR has met the objectives it set.  

We will be closely monitoring this work and submitting our own evidence gathered from members.

Advisers have taken on board the changes of the RDR across their firms, and we now see a sector with higher professional standards and clearer charging structures.  

In light of the improved protection and service for clients, the Association of Professional Financial Advisers (Apfa) has launched its Regulatory dividend campaign, calling on the FCA to lower the direct and indirect costs of regulation for an advisory business but not the standards of consumer protection.  

Our campaign also calls for the introduction of a longstop on liability, a review of data reporting and a fairer more equitable assessment of the costs allocated to the distribution fee block.  

With the FCA being in place for only a few months so far, its different approach to regulation is already becoming clearer.  

Some commentators predicted the rebrand would merely mean that we have the same regulator in a different guise, but the FCA talks of greater transparency, more emphasis on markets that work rather than rule making, measurable performance indicators and better value for money.

Time will tell, but the signs are promising.

The last few years have meant unprecedented change for the distribution of financial services but as the dust starts to settle the opportunities for advisory businesses are increasing.  

The need for good financial advice is becoming more apparent than ever as increasingly individuals, who may never have saved in the past, need to look to their own resources and manage them effectively as they plan for the future.  

Apfa has and will continue to do all it can to bring about the best environment for financial advice businesses.

Chris Hannant is director general at Association of Professional Financial Advisers

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