It is clear that some parts of our financial services advice market are not working properly for consumers, and that reforms are needed to ensure there is greater transparency and fairness in the investment industry.
The Treasury Select Committee has published its report following our inquiry into the Financial Services Authority’s Retail Distribution Review. The RDR is a major reform of the regulation of retail investment advice and is due to come into force on 1 January 2013; in particularly, it would require advisers to have qualifications equivalent to a Certificate in Higher Education in order to practise, and remove the system of commission paid to advisers and replace it with Consumer Agreed Remuneration.
As I outlined when I questioned the FSA’s Chief Executive and Director of Conduct Policy during their oral evidence session to the TSC in March this year, I am very concerned that some of the proposals being brought forward would cause large numbers of Independent Financial Advisers to leave the market. The FSA itself has conceded that this would be the case, and this this would reduce competition and choice for consumers.
You can watch my exchange with the Chief Executive, Hector Sants, and the Director of Conduct Policy, Sheila Nicoll, below.
The TSC is now calling, in our report, for a delay of twelve months in the implementation of the RDR in order to allow advisers to satisfy the new requirements, and we believe that this would likely increase the number of firms and advisers making the transition to the new system, while recognising the fact that many advisers have already complied with the RDR’s requirements.
We also view the creation of the Financial Conduct Authority, as it replaces the FSA, as an opportunity to examine the accountability mechanisms that will apply under the proposed new system of financial regulation. The TSC will be launching an inquiry in due course to form a view on whether they are adequate.