Can RDR make a difference?
The Retail Distribution Review (RDR) is by far the largest of the initiatives UK regulators have introduced to try to deal with deficiencies in the workings of the UK advice market. No Monkey Business thinks there are three key objectives for public policy in this area: raising the quality of advice, lowering the cost of advice and increasing public access to advice. In a very sensible article from Morningstar, in which Stuart was extensively quoted, the reader is left to wonder whether RDR might end up raising the cost and therefore reducing even further public access.
If so, RDR may end up being judged as the wrong way to achieve better consumer outcomes – unless you only count the outcomes of people able to afford advice.
As background information, Stuart says that there are about 50,000 individuals authorised to deliver retail financial advice in the UK, mostly in small firms well dispersed across communities. Discretionary wealth managers and private client stockbrokers, also drawn into the RDR, represent only about 10% (and account for very few customer complaints against the industry). The largest sector in terms of ease of access (rather than numbers of advisers) are in high-street banks and so the recent decision by Barclays to pull out of branch-based advice suggests the FSA does have a case to answer.
You will find plenty of venom directed at banks on this website but we still have to note that banks are the dominant force in distributing investment as well as savings products in virtually every country. So the public policy goal of access meant the FSA had one overriding priority for RDR: reform the banks but whatever you do don’t drive them out of the market. Oops.