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RDR debate has a long way to run but IFAs must be realistic

Yesterday's meeting of the All Party Parliamentary Group on Insurance & Financial Services to discuss the implications of the Retail Distribution Review for Independent Financial Advisers attracted alot of interest from MPs as well as a full public gallery.

It heard from four different perspectives but there was an underlying consitency around their messages : RDR is going to happen and happen largely in the form now proposed. There were, of course, differences about the detail and, especially from the IFA representative calls for the Financial Services Authority to review some of the important details.
Those presenting to the MPs were:
  • Stephen Gay, Director General, Association of Independent Financial Advisers
  • Dominic Lindley, Principal Policy Advisor, Which?
  • Sheila Nicoll, Director of Conduct Policy, Financial Services Authority

This meeting actually gave MPs a more balanced view of RDR than their own debate at the end of last month when the fierce lobbying by some smaller IFAs produced a very one-sided debate. There are IFAs strongly committed to RDR and obtaining their Level 4 qualifications and this was an opportunity for their voices to be heard. With around 89% of IFAs already on course to reach the requirements this is an important group.  It was especially interesting to hear AIFA's rejection of the calls for 'grandfathering' of experienced IFAs into the new regime without having to take the new qualifications. This had been one of the most prominent themes of the November debate. Stephen Gay claimed that MPs would have many more emails and letters from angry IFAs if grandfathering was allowed, firstly because they would resent people being allowed to get away without having to take and pass the qualifications and, secondly, because it would also mean that experienced bank and other tied advisers not popular with IFAs would slip in too.

The meeting was also important because it heard the consumer viewpoint that was strangely absent from the debate in the House. While Which? praised IFAs over tied advisory channels it made clear that there was considerable scope for improvement if the sector was to move on from the dark days of mis-selling and enter the bright new world of genuine professionalism.

Did all of this persuade MPs like Harriett Baldwin, Mark Garnier and Heather Wheeler that all is sweetness and light with RDR? No, far from it so the debate will run for sometime yet in Parliament. We have the Treasury Select Committee set to take evidence and produce a report and we have already seen the FSA get in with a blunt opening salvo on that front. This enquiry will produce a report that will also be debated in Parliament and which, unlike the November debate, will probably lead to a vote. Just because nobody apart from Treasury minister Mark Hoban rushed to the defence of the FSA and RDR in the last debate shouldn't lead to the conclusion that a vote on a Treasury Select Committee report (which may or may not come out against RDR or certain features of it) will result in triumph for the opponents of the perceived harsher aspects of the regime. If there is any real danger of that happening the government whips will be out to ensure it doesn't. They will have their work cut out, however, judging by the success of the lobbying that has been done to date.

IFAs do have a chance to extract some concessions from the FSA and the agenda put forward by AIFA looks sensible, realistic and achievable. Of course, it is not backing those IFAs fighting a broader front against RDR but it has them to thank for the fact that there is a fresh engagement with their agenda. Indeed, I would go as a far as to say that the whole industry owes the anti-RDR IFAs a debt of gratitude as there have been very few times in the 25 years plus I have been covering the financial services sector and its relationship with Parliament when so many MPs have been willing to attend and speak in a debate on an issue of genuine concern and importance to the industry. When it has happened in the past it has usually been because of some serious failing on the part of the industry - Equitable Life, pensions mis-selling, the endowment scandal and so on. But then, those issues are the reasons why we have RDR in the first place and why it shouldn't go away.

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