So, the much leaked and speculated-about FSA Discussion Paper concerning the Retail Distribution Review was published on Wednesday (27th June). DP07/01 to give it its correct title, sets out the observations of five ‘focus’ groups comprising industry movers and shakers and covers the following topics:
• Sustainability of the distribution sector
• Impact of incentives
• Professionalism and reputation
• Consumer access to financial products and services
• Regulatory barriers and enablers
These august groups describe, in their opinion, an industry that has a fundamentally broken distribution model and try to set out their vision of the future for intermediated distribution.
The proposals set out to create tiers of advice, ranging from full market to limited, minimal advice. As expected, the removal or severe curtailment of initial commission as a method of remuneration has generated the most amount of comment.
As you would expect, there has been an explosion of reaction from the IFA sector, with many commentators predicting the end of the IFA sector, with mid-tier intermediaries unable to change their remuneration models. In addition, the proposals set out further barriers to entry to the full market advice model by requiring further professional qualifications.
What is clear is that should the proposals be enforced by the Regulator, the current building of distribution by the Banks and larger institutions would be in prime place to gain – perhaps that is the underlying motive, especially as the capital adequacy requirements are to change also, again arguably in favour of larger enterprises.
There is no doubting the resilience of the IFA – I’ve been involved in this industry for longer than I care to remember, but I have learnt never to under-estimate the stalwart characteristics of the sector.
We’ve a long way to go on this topic….
