Out-Law News 2 min. read
02 Dec 2013, 9:41 am
Speaking at an industry event, Andrew Tyrie said that it would take "at least two years" before the effect of the reforms on the retail investment market was properly known. The influential committee would also want to see the results of a number of thematic reviews on implementation, to be carried out by the Financial Conduct Authority (FCA), before it began its work, he said.
The Treasury Committee had been considering an earlier review of the RDR following concerns that the restrictions it placed on commission was pricing some advisers out of the market, according to New Model Adviser, which carried Tyrie's comments. However, insurance law expert Bruno Geiringer of Pinsent Masons, the law firm behind Out-Law.com, said that it made "perfect sense" to wait.
"The RDR has been a major structural change in the UK affecting how retail investments are sold and how advice is provided," he said. "It will take time for the initial impact to mature into a sustainable pattern which can be properly assessed against the original objectives and evaluated whether it has truly been in the customers' best interests or not."
"The FCA is embarking on a series of RDR-related thematic reviews at the moment and there will also of course be the all-encompassing post-implementation RDR review itself to come in 2014, as promised in the original and many subsequent RDR consultation papers. The Treasury Select Committee would no doubt be in a much better position to cast their judgment after seeing the outputs from these reviews which, in themselves, should make for very interesting reading next year," he said.
The RDR rules, which came into force at the end of 2012, banned financial advisers from receiving remuneration by way of commission payments from product providers for advice on, and the sale of, retail investment products. Instead, advisers are required to be paid by their clients for the personal retail investment advice they offer. Advisers are also prohibited from referring to themselves as offering 'independent' advice unless the personal recommendations they make to clients are "based on a comprehensive and fair analysis of the relevant market" and are "unbiased and unrestricted".
Before the changes came into force, the Treasury Committee announced that it would be monitoring their impact and whether they actually benefitted consumers. It had previously expressed concern about the "cliff-edge nature" of the reform programme, and had called on the introduction of the RDR to be delayed by a year.
Addressing the annual gala dinner of the Association of Professional Financial Advisers, Tyrie reiterated those concerns, stating that the Committee had been right to warn that the way in which the rules were implemented would lead to a substantial loss in the number of advisers and firms. He said that there was now "possibly a risk of consumer detriment" in the market as a result of the reduction in competition.
Tyrie said that there had been "far too much box-ticking and mindless data collection" from the FCA's predecessor, the Financial Services Authority. He said that it was the Committee's job to ensure that the FCA was providing "higher quality" regulation than the FSA without placing too much of a burden on regulated firms.
"Parliament must hold regulators to account to get that balance right [between stability and innovation]," he said. "If they get it right they will set it at the level that maximises economic activity legally conducted. It's Parliament's job to help balance out those conflicting measures."
