Retail Distribution Review
Written evidence submitted by Stephen Henry, E M Gray & Co
1.
I am a Senior Partner in E M Gray & Co which is well established firm of financial advisers. I have been a practicing Financial Adviser for almost 31 years. The Retail Distribution Review being implemented by the FSA will have potentially irrevocable and disastrous implications for financial advice in the UK. In connection with the proposed discussion by the Treasury Committee I want to make the following submission.
2.
Mr Hector Sants FSA told the Committee that the RDR had three specific outcomes:
a)
A transparent and fairer charging system
b)
Abetter qualification framework for advisers
c)
Greater clarity around the type of advice being offered
It is my personal opinion that some aspects of the regulatory change are positive i.e. raising professional standards and competence, but the first point a) above I believe will be disastrous for the average UK citizen.
3.
The Proposal to abolish commission as a means of remuneration will disenfranchise the largest section of the community from receiving advice as they will not and cannot afford to pay fees for advice that they will need.
4.
Having had conversations with my clients on the proposals, my average client who I have looked after for many years and built a relationship as his trusted adviser giving face to face advice will not be willing or able to continue with our relationship on a regular fee paying basis. That part of the UK market place (High Net Worth clients) used to paying fees is very much the thin end of the wedge.
5.
The FSA’s rationale for fee charging because of product and provider bias is flawed. The FSA’s own research courtesy of Charles River Associates, which found limited bias and commented that it is more a case of perception. Charles River Associates also confirmed that there was no evidence that fee-based advice provided better outcomes.
6.
I feel very strongly in making my point that the consumer should have the choice of paying for their advice by commission, which under the current system is quite clearly shown. Any of my own clients I have spoken to do not have a problem with commission based advice, but will not pay fees.
7.
The abolition of commission as a method of remuneration for financial advice will see a large reduction in the number of decent, qualified financial advisers when government statistics already show the shortcomings in the nations savings and pensions.
January 2011
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