The Retail Distribution Review (RDR) will have "clear detrimental effects" on the accessibility of financial advice and lower overall savings rates, Lord Flight has warned.
In a letter to the Financial Times, the Conservative peer said the Treasury and the Financial Services Authority (FSA) were "hell bent" on implementing RDR despite the fact less well off people will not be able to afford advice.
He also said RDR would hinder the recovery in savings the economy needs.
His letter to the FT said : "The rich will be affected little; they have the resources to pay for advice. But financial advisers will not be interested in those with savings of the order of £100,000 or less who I doubt will be willing to pay fees out of after-tax income, of the order of 1% or 2% per annum. The net result will be many fewer people getting any financial advice."
Flight said it would have made good common sense for trail commission from fund managers to advisers to continue.
"The clients would need to know precisely how much trail commission was being paid and the terms as between one fund and other. For once the EU has got this issue right, by permitting independent financial advisers to opt out of RDR with their clients’ permission – as is now being implemented in Germany."
He added: "The problem with the Treasury and FSA’s elitist attitude here is that they do not appear to understand that 'the man in the street' is not willing to pay what would be significant regular fees out of after-tax income when frequently no changes are being made to their holdings.
"The message is clear – give up bothering to save."
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