The RDR will fail consumers unless the FSA commits to a read-across of the outcomes of the review to every financial advice market, Skandia says.
Currently the review only applies to the investments sector, but the FSA has hinted that firms in the mortgage and protection arena would be “free to apply” any RDR outcomes to their own businesses.
Skandia says this may cause firms to adopt “widely varied approaches” when applying RDR outcomes and argues this inconsistency could harm the consumer experience of the sales process.
In addition, Skandia says the RDR provides an “excellent opportunity” to simplify distribution in the retail market into two categories – advice and no advice – and to introduce Customer Agreed Remuneration (CAR).
Michelle Cracknell, Skandia strategy director, says: “Consumer perception is their reality and so if the RDR is to be the success that we all want it to be, the perception of consumers must be at the forefront of our thinking.
“To attain the credibility and reputation that will inspire consumer confidence, the industry needs to fully appreciate the benefit of standardising the experience for the consumer.”
In the RDR interim report, the FSA said it still has no current plans for a ‘read-across’ of the RDR from the investment market to the mortgage, protection or general insurance markets.
“An inconsistent consumer experience will damage the positive reputation the FSA seeks to build through raising professional standards and will result in the RDR failing in its key objective of improving outcomes for consumers,” Cracknell adds.
Skandia says separating advice from sales must be the key outcome of the review.
“A clear distinction between advice and no advice and absolute clarity for consumers around how much they are paying and for what services should apply across the whole market,” Cracknell says.
“In making the processes consistent and predictable it removes any feelings of distrust or intimidation that can spring from the fear of the unknown.”
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