Retail Distribution Review

Written evidence submitted by Andrew Reeves, The Investment Coach Ltd

Executive Summary: The RDR has been in consultation phase for long enough for those with views to come forward. For the sake of continuity and because I believe it does, broadly, meet the three intended objectives: 1. A transparent and fairer charging system; 2. A better qualification framework for advisers and 3. Greater clarity around the type of advice being offered – for these reasons RDR should be allowed to proceed.

1. Taking the three objectives in turn. "Consumer agreed remuneration" does indeed give a fairer charging system. Many financial services people have the opinion that this objective means a ban on commission and a move to fees. This has never been the case the agreed remuneration can still come from the underlying product. I believe that innovative solutions will transpire to make the process more professional and transparent. Wrap accounts are leading the way here.

2. Regarding qualifications. There has been criticism raised that a sudden "raising of the bar" mid-way through a financial services person’s career is unfair and would not happen in other industries. Whilst there may be some truth in this – the level of qualifications required to give advice are low and the impact on clients due to this "knowledge gap" could be huge and long-lasting. Financial decisions can last a lifetime. Industry experience should go alongside and not be a replacement for qualifications. To "water down" the requirements now would also be inequitable to those that have pursued further qualifications already.

3. My biggest concern, from a consumer’s prospective, is the complexity that seems to be suggested around the type of advice offered. RDR is taking a backwards step here. Importantly, it is stifling innovation with nebulous concepts around "restricted advice". The lack of innovation shows up in the dearth of websites that can help a consumer take "financial action" rather simply garner information. I believe this is because the regulations around financial promotions are too restrictive. It is the sales channel that needs regulatory attention and not so much the type of advice given. As previous work into polarisation (and further minor amendments thereafter) determined: there is tied advice, multi-tied advice and independent advice. That is it. Granted that within, say the category of "independent" a firm may wish to run product/service panels of preferred suppliers and/or investment models. A clear disclosure of this ("the restriction statement") that is publically available on the web (and subject to regulation) should suffice here rather than creating another category of "restricted adviser".

December 2010