The FSA, or as it is soon-to-be called, the Financial Conduct Authority (FCA) cannot afford to delay any longer and must ensure that RDR is brought in on the stated date of 1 January, 2013. The industry has been working towards this date for the past four or five years and just because it is complex, difficult, earth-shatteringly different to how advice is currently given are not good enough reasons to delay it any further.
The chief executive of Which?, Peter Vicary-Smith, says: “The majority of IFAs have worked hard to meet the deadline and have bought into the need to raise industry standards, but a vocal minority seem determined to derail the process.
“Delaying the RDR would prolong consumers’ exposure to the potentially disastrous effects of poor financial advice, so it’s vital that the FSA sticks to its guns.”
But there are a number of stumbling blocks that the Select Committee says justify such a delay, the two biggest of which are:
Qualifications
The Select Committee is concerned the FSA will not allow ‘grandfathering’ of advisers who do not have the relevant qualifications.
The FSA is adamant that grandfathering is not allowed.
While agreeing that a greater standard of knowledge and a greater minimum of investment understanding is required, common sense alone would suggest that unduly getting rid of individuals who on 31 December, 2010, can use their years of investment experience to continue to give quality advice should overnight be banned from doing so is counter-intuitive.
More time should certainly be given to offer them exemptions, trading exam certificates for experience and knowledge already gained.
As a reminder, we are talking about a minimal number of intermediaries here as, at end of last year, the FSA reported to the Select Committee that at least 90% of IFAs will have their studies complete by the end of 2012.
Commission
The FSA wants to ban it; the Treasury Select Committee broadly agrees.
The Treasury Select Committee is still covering all bases (i.e. its own backside) by suggesting the FSA looks more closely at certain aspects such as the impact on small firms and VAT.
If small firms are unable to meet the requirements of RDR then, for the benefit of the end investors, they will have to come up with a new business model. Outsourcing to those who can give investment advice is one very popular and obvious solution that Portfolio Adviser will continue to cover.
HMRC should have been involved to a far greater extent than it already has been to confirm categorically and in black and white what should have a VAT charge and what should not.
The majority of the industry is working towards a 1 January, 2013, implementation and there is nothing that should lead to a delay. Even with a cliff-edge date of 1 January, 2013, the changes will be positive though they won’t be seen for a number of years.
The conclusion is simple – bring RDR in on the date the entire industry is working towards and give the people who its is designed for – consumers, not fund managers, life companies, banks or wealth managers – the platform for better advice, with a transparent and fair charging system, from highly respected professionals.
