The FSA's Retail Distribution Review is "fundamentally flawed" and ignores general consumers and a number of major issues, management consultancy Navigant warns.
The firm says the RDR fails to take a holistic view of the industry, snubbing mortgages, general insurance and banking connections, while considering only investment products.
It also says the RDR uses old regulatory distinctions which can only add complications and confusion for consumers.
“The model set out in this discussion paper not only breaks the financial services industry into too many parts, but it is also far too complicated and will only serve to muddy the waters for buyers of financial products,” Navigant Consulting life and pensions head Kenn Taylor says.
Taylor hit out at the proposed four tiers of qualifications, saying they will do little for consumer clarity.
“Although professional standards are important, they will do nothing to solve the economics of distributing to the mass market,” he says.
“As it stands, the more wealthy segments of the market are well-serviced and profitable for advisers.
“We believe there is only space for two routes: professional advice and general guidance with clear connections to move between the two.”
Navigant has three key distribution model recommendations:
- A simple consumer-centric model for advisory services and higher professional standards.
- Greater clarity on the services provided and their costs with more transparent remuneration arrangements and separation of product and intermediary cost.
- Simple advice models based on product ranges with a broad fit for purpose test and standardised portable fact finds.
“The fact is that 90% of consumers have a family income of less than £100k and their needs can be satisfied by four simple product groups: protection, tax-advantaged savings, mortgage and pension,” Taylor added.
"The mass market needs only simple guidance to help ensure a secure financial future.
“As they stand, the current set of initiatives do not set the right framework to address these needs.”
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