Anticipating the Retail Distribution Review

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Insights from a firm that knows about alternative (consumer-friendly) business models
Key points

The background to the RDR is economic. There is a ‘market failure’ in the distribution of long-term savings products (FSA, Treasury, HOC Treasury Committee, Myners, Sandler). Three aspects: i) the business model for firms involved [...]

Barclays Bank: Not treating customers fairly starts – and ends – in the board room

“Lying to customers, mis-selling products, fraudulent accounts, and unscrupulous sales tactics – an undercover investigation reveals the hidden side of a high-street bank.” Wednesday night’s BBC Whistleblower investigation was based on an under-cover reporter’s nine months of employment by Barclays Bank, in a call centre and in a branch. Nobody watching the filmed evidence of shockingly cynical practices could have avoided a conclusion (not over-played by the film makers) that these were a direct response to remuneration incentives put in place by senior management of retail banking.

Solving problems in the retail investment market: the FSA consults

In January I went to see the head of the FSA Retail Distribution Review team and some of her colleagues. The FSA set up this team to address the root causes and effects of problems in the distribution of long-term savings products. The fact that the FSA is on this case is good news. But the really good news is that it no longer needs persuading about the root causes. These were stated with surprising bluntness in FSA Chairman Callum McCarthy’s Gleneagles speech.

Connections: regulation, the cost of advice, ’soft-compulsion’ pensions and posturing at the despatch box

Thursday’s despatch box spat between Brown and Osborne (the ‘effing’ word, thrown papers) was prompted by John Redwood daring to suggest (as part of his deregulation thought-leading role in the Conservative Party) that financial services consumers might be better off with lighter regulation or even an opt-out for riskier products. The Chancellor’s reposte was typical despatch box posturing: the Tories plan to abolish all consumer protection on pensions, mortgages, insurance and credit cards.

D(epolarisation) Day: what might have been

From 1st June all financial advisers must spell out whether they are independent agents or tied to one or more product manufacturers and what and how they get paid. It’s the last step in the FSA’s ‘depolarisation’ programme and a much watered down version of its original plan to make the adviser/salesman distinction clearer and prevent commission bias. How watered down is demonstrated by the belief in the industry it need make no effective difference to how you run your business.