Retail Distribution Review

Further written evidence submitted by Paul Naylor, A P Financial Services UK Ltd

I believe you require some factual information to show why the majority of IFA's firmly believe the Retail Distribution Review (RDR) will be detrimental to the continued growth of the investment and savings industry.

.Mr Hector Sants has stated on more than one occasion that the loss of20% of IFA's from the Financial Services Industry is acceptable when RDR is implemented and the New Level of Qualifications comes into force (without grandfathering) and when commission on financial products for IFA's is banned.

I believe most strongly that Mr Sants and the FSA's "Saving Face" attitude to RDR implementation is not supported by any cogent or compelling data as to the potential benefits for consumers or the industry as a whole.

Mr Mark Garnier who is a member of the TSC has stated he wants Pro RDR advisers to speak up and requires hard data to study, so I have enclosed two documents for the TSC's consideration, the most recent FSA Product Sales Data published in 2009 and the Financial Ombudsman Service Annual Review of Complaints. These two publications demonstrate that RDR proposals will have little consumer benefit.

Two things stand out in the PSD Report and that is how the general trend to reducing sales of pension and other investment products is evidenced in the graph on page 6 and also clearly demonstrated in the table on page 8 which shows a year on year decline.

In the FOS Annual Review it clearly shows on page I of that report that only 2% of all complaints received by the FOS were about IFA's and only 39% of those were upheld by the FOS.

Mr Sants has clearly stated to Money Marketing (6/1/2011 issue page 9) (copied herein) that mis-selling costs the public £600m per year. If that figure is correct and there seems to be no supporting data to back up this statement, then as a sector the IFA's are the least responsible for mis-selling as he puts it, yet we are being asked to pay for 18% of the costs of RDR implementation.

Not withstanding the ever increasing costs of this poorly planned, badly constructed and ill conceived plan, there is a disproportionate burden being placed on IFA's, of whom 20% are expected to leave by the end of2012, or in the alternative after decades of building up our businesses, be disenfranchised of our authorisation if we .do not comply with the new qualifications.

Having been an IFA for over 20 years and an industry practitioner previous to that with Life Offices for a further 6 years, I am deeply disturbed that a regulatory body such as the FSA can have the right to put me out of a job without any justification.

The costs of implementing RDR proposals far exceeds the costs of alleged mis-selling and therefore I can see no benefit to consumers, and the money would be better spent bringing the banking sector under control.

There is no evidence that banning commission is going to benefit consumers and it is my belief that if, as Mr Sants predicts 20% of IFA' s leave, we will see a corresponding decrease in savings and investments in the retail market.

This will harm the country’s economy because if the retail investments see reduced capacity industry and commerce will find it even more difficult to obtain capital for investment.

Mr Sants and his RDR team seem determined to see the RDR come to fruition despite ·the opposition of the IFA sector and it seems the only realistic motivation behind it is to reduce the IFA sector to the lowest common denominator and make IFA services only available to the wealthy, whilst placing the major channel of retail investment firmly in the control of the Banks, Building Societies and Direct Sales Forces for Life Offices.

In the wildest stretches of my humble consideration I could not imagine a more consumer unfriendly and consumer detrimental approach to the problems we have encountered. The times scales are too short and the banning of commission is just plain daft, has no consumer benefit and will discourage consumers from seeking professional advice.

January 2011