RDR is clearly a major regulatory event for IFAs, comparable perhaps with depolarisation in December 2004 and polarisation before that in 1988.
Depolarisation essentially offered advisers a choice of staying fully Independent by offering products from the whole of the market; going multi-tied or going Tied to one single provider. In reality most IFAs simply stayed Independent while a small number of major distributors set up ‘mini-ties’ with a small number of providers.
Clearly the largest issue for IFAs going through RDR is that they must charge fees for advice rather than be paid commission by product providers for the product they sell following that advice. Fees-only remuneration is undoubtedly a game changer for the retirement advice market.
It is no surprise therefore that IFAs that we polled last May are divided on the merits of banning commission payments – over two thirds (68%) remain against this move; and nearly the same number (69%) think the new qualification and training requirements demanded of them by RDR, renders provision of independent financial advice to the mass market quite simply unaffordable. But surely the reality is that the mass market has never had access to a whole of market IFA and firms have railed against increased training requirements being forced upon them by regulation since the dawn of regulation.
The FSA’s tight definitions of Independent and Restricted advice are not liked by IFAs. 72% of them thought the FSA had got these definitions wrong. But the reality is that three quarters of the sample Dunstan Thomas polled said that they intended to remain whole of market IFAs after RDR despite the increasing demands being placed on them.
Nearly half (43%) of our IFAs polled thought that up to a quarter of IFA firms will cease trading because of the new demands placed on them by RDR. But we think these figures are exaggerated because they understate the ability for most IFAs
to adapt and keep adapting to what the regulator and the government of the day throws at them. They are run by small business owners determined to survive for their own livelihoods and do so be serving their customers well. They’ve already had to cope with an array pensions reforms and the rise of wrap platforms in the last few years and yet we were able to survey over 16,340 of them last year and will be able to reach nearly as many in a year from now.
