Professional Adviser's Armchair Critic Brendan Llewellyn wonders whether, against all common consensus, the government should look back to move forward if it wants a nation of financially secure citizens...
I was driving slowly through central London recently, caught in a queue behind a Range Rover - the urban travel brand for the hard of thinking - when I spotted its number plate: RDR 2. Which got me thinking: Three years after RDR MkI, what delights might RDR: The Sequel bring?
A primary theme in RDR MkI was an attempt to re-jig the relationship between provider and adviser by placing remuneration in the hands of the adviser and client. There has been some progress here, but many advisers express their fees as a proportion of the client's capital or, to put it more directly, they charge a fee based on the product sold. I suspect this will come under review.
Additionally, some products were out of the scope of RDR MkI, such as protection. Might this change?
The original RDR was clearly weak on the matter of commercial relationships between providers and advisers, hence the somewhat hurried guidelines on inducements. Support from providers to advisers isn't quite what it used to be, but it remains awash. If provider support spreads beyond product, then isn't it just a payment in kind?
The inducements guidelines are also biased in favour of vertically integrated propositions. Unless the regulator wants to tilt the market, it should review its approach.
The idea behind RDR MkI was not, I hope, to reduce the availability of advice.
The qualifications barrier seems to have been vaulted nicely, and indeed many advisers are going further.
But the banks pulled out of advice so the number of people offering it is now too low. I write ‘too low', not because there is some higher level requirement for advice to be well supplied - that is the market's job. The problem is more that, as advice is quite expensive to provide and hence buy, there are too few people being sold to.
The ‘s' word, I know, has more or less been outlawed in financial services. But the reality is that when there were many more people distributing in financial services, part of what they did was selling. Believe it or not, some people need a nudge.
So, what are the choices? If proper advice is only available to the well off, or the reasonably well off, the solution has to be to make some ‘different' advice available. The simplified advice thing just has to get going.
Or we could resuscitate sales and create a regulatory structure to encourage capital to invest in sales forces (more tightly controlled than before, of course, and with more of a focus on consumer outcomes). Will some things go wrong if there are more sales forces out there? Of course. But there will also be more consumers a financial plan. Pick your potato.
This has to be the clarion call for RDR MkII. We have built a complex set of processes based on sophisticated input and process management, and that in part has contributed to the cost of delivery, but the FCA's call for a focus on outcomes has not yet bitten. It needs to.
Crucially, the notion of outcomes must embrace the idea of broader engagement - it can't just be about preventing detriment.
For example, which do you think is the better outcome?
1 Ten million people making decent provision for their lives and in 5,000 cases something goes badly wrong, or...
2 Some 20 million people make decent provision but 20,000 cases go badly wrong.
For RDR MkII to make its mark, we have to prefer the second outcome.
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