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Retail Distribution Review

Comment 2nd July 2010

The Financial Services Authority have been regulating financial services for over 12 years. During that time, we have seen Equitable Life and Northern Rock nearly go to the wall. We have seen lenders allowed to lend irresponsibly and now hardly lend at all. We have suffered one of the greatest recessions this country has seen and they still think they know best.

The retail distribution review (RDR) is their attempt to stop mis-selling scandals of the future by using a twin approach of increasing the minimum level of qualification for each adviser and by the scrapping of commission.

That sounds fine in principle but like so many of their other ideas for regulation, it won't work. Take commission. The basis for the RDR is that commission makes the adviser bias towards the highest paying commission product. That can simply be countered by having level commission. i.e. products that all pay the same amount.

Again, higher qualifications, sounds good. The difficulty is that as an industry, most 'Independants' are over 50. How would you like to take a degree at over 50 with the threat hanging over you that if you didnt pass you'd lose your livelyhood.

Looking at the number of complaints would give an indication of where financial problems occur. The Independent sector account for about 4% of complaints. About 80% come from advice given by the banks. Yet the proposals will have the effect of closing down 'Independents' and driving customers to the banks.

Why does this matter?

If the RDR continues, customers, if they require 'Independent' advice will be forced to pay a fee. Research and studies have proved time and again that for financial products, only the wealthier end of the market can afford to pay an adviser for financial advice. I work in the financial advice sector and the whole of the market is gearing up to offer advice to only those who can afford it. They call it segmentation. It sounds like something Hitler could have dreamt up.

So the reality will be that there will be fewer 'independent' advisers as they leave because they can't or won't take the exams or that they can no longer make a living advising the average customer because there is no commission and the customer cant afford the fee.

Well done FSA. Another fine acheivement that ends up with the opposite of what you actually wanted.

Added to the lack of independant advice for millions will be the loss of an industry that employs hundreds of thousands up and down the country,

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