The Retail Distribution Review: no solution for consumer confusion
A key decision the FSA needed to make, after consulting the financial services industry on its June proposals, was how it could help consumers be clear about the differences between independent financial advisers and product sales people. Its conclusions, in a feedback statement last week, will not help. The problem is that effective distribution to the mass market cannot be achieved by expensive free-standing advice businesses and needs big high street institutions with manufactured solutions. This vertical integration of manufacturing and retailing will always make advice fundamentally conflicted. But European regulations prevent us going out on a limb even if we wanted to so we cannot make independence a condition of using the term ‘adviser’ and we cannot make manufacturing or tied distribution arrangements a requirement to use the term ‘salesman’. So what we get is ‘independent advice’ and ‘sales advice’.
The No Monkey Business answer was in the book: consumers need to recognise the marketplace as it exists and be much more streetwise about the agenda of the people they deal with. In other words, the answer is not more trust but less. And confusion is better than relying on labels as just another excuse for lazy thinking.