The first stage of the Financial Conduct Authority's (FCA) post-implementation review into RDR was broadly positive, showing that the level of professionalism for financial advice has increased, with more advisers gaining additional qualifications and tailoring their guidance to investors’ individual needs.
The review – conducted by Europe Economics – also found “little evidence that the availability of advice has reduced significantly, with advisers still willing and able to take on more clients”.
RDR was implemented in December 2012 to address failings in the financial sector by removing commission payments to advisers and providers, ensuring advisers have a minimum level of qualification, and improving the transparency of charges.
"Divorced from advice"
However, a report published in November by Garry Heath, former director general of The IFA Association, disputes this fact, claiming that the advice gap has grown since the implementation of RDR two years ago, leaving 3.5 million people “divorced from advice”.
In fact, Europe Economics found that the availability of advice is dependent on the amount a client has to invest, with advice being more readily available to wealthy investors.
But the review acknowledged that the impact of RDR on price has been mixed, with product and platform costs generally falling, but not adviser charges.
Meanwhile, product bias has declined significantly, with the sale of products which had higher commissions prior to RDR decreasing, and those products which paid lower or no commission increasing.
“It is still early days but the indications are that the sector has responded positively to the reforms,” said Martin Wheatley, chief executive of the FCA.
“Importantly, we have seen a reduction in product bias, with a very noticeable decline in the sales of those products that before RDR came with higher commission.”
"Still more to do"
Despite the positive outcome of the review, Wheatley said “there is still more to do”, and next year the UK regulator will be looking to encourage better disclosure of information to consumers.
The post-implementation review been published alongside a thematic review into the disclosure of services and charges. This review found that there have been improvements in how firms disclose the cost of their advice, their scope of service, and the nature of their services to clients.
But the FCA said developments still need to be made into disclosing the cost of ongoing services.
A further review of RDR is due to take place in April 2017.
