Regulation and Politics
RDR’s slow motion impact on consumer confidence
Wednesday, August 7th, 2013

The RDR is already having impact on consumer confidence, according to a Cofunds’ adviser poll though while the headline figure shows 57% of advisers saying it is improving or will improve confidence, it all feels a little bit slow moving.

Cofunds asked 404 financial advisers – so statistically significant – how long they expect it to take for consumer confidence to change following the introduction of RDR. Sixteen per cent of respondents believe confidence has improved, 4 per cent expect to see an improvement this year, 13 per cent after a year, 12 per cent after two years and 12 per cent expect it to take more than three years. Meanwhile 42 per cent believe that RDR will have no impact on consumer confidence.

There is also an encouraging response to the new way of charging – which Cofunds describes as fees.

Thirty per cent of respondents to the same poll said their clients have reacted positively to the transition, while 57 per cent said their clients’ have on the whole responded neutrally. The figures roughly match responses to the same question in a poll conducted in April 2012, the platform says. However some quick Money Debate subtracting suggests there is a worrying 13 odd per cent of advisers who have clients who may not be totally happy which is something of a worry (unless IFAs no longer want those clients).

But it is the confidence part which is worth discussing here, because it means IFAs individually and as a sector may finally begin to see some benefit after all the hassle, the hurdles and the exams.

The biggest chunk of advisers who see confidence improving see it taking between a year or several years. It all feels a long way on from the start date and of course there is still a substantial minority who feel it will have no impact at all.

But while this is a very useful survey, I would really like to hear advisers’ views broken down one bit further as follows – is the RDR improving your clients’ confidence in your proposition and is the RDR likely to improve confidence in the sector as a whole? The second one is surely the killer question. If the RDR stops or significantly reduces problem sales and recommendations, fiascoes, scandals, imbroglios, call the problems what you will, then there will be a good case to argue it was worth it.

From there, it may then be possible to make a broader case for just why IFAs need to be more involved in convincing the public to save, invest and insure more (and contribute more than 8 per cent into a pension too).

By the way Stephen Wynne-Jones’ quote is quite interesting placing the blame for a lack of confidence “in the main” on providers not advisers. He says: “Advisers have proved themselves to be incredibly adept at managing to put their clients first, all the while taking everything the regulator throws at them. So it’s encouraging to see that with this latest piece of regulation their sterling efforts, in very trying times, are already feeding through to improved consumer confidence – a confidence, it’s important to remember, that was knocked in the main by providers, not advisers.”

(Providers not advisers? Would they agree at the ABI and the IMA we wonder)
Does retail financial services need a shake up in the approved persons regime?
Tuesday, July 9th, 2013

This may go without saying but the move to abolish the approved persons regime has come about because of the behaviour of senior banking staff and the inability of the FSA/FCA to come down on them like the proverbial ton of bricks.

Not a bad initiative you might say, recommended by the Parliamentary banking commission, with a senior persons regime requiring a high degree of responsibility with lower level staff to be licensed. The chairman of the FCA John Griffith-Jones, reported in Money Marketing, says he sees no reason why the regime should not apply across the market.

But although the Money Debate hasn’t made up its mind, we do need to ask if the change is necessary, appropriate and proportional when it comes to advisers. In fact, do IFAs and others in this neck of the woods have a view whether the approved persons regime has worked. (It does seem most people make it through which may be a bad sign). But perhaps we also need to consider whether another shift in processes and practices will make things safer or be a distraction for regulator and regulated. Views welcome.
Friday thoughts – Out of date portfolio theory/ Pension fight pen / China’s misselling risk
Friday, June 21st, 2013

Chris Gilchrist has slated modern portfolio theory in Money Marketing this week because it can’t cope with financial crises which is, obviously, a slight problem at the moment. But it is the following point which catches our eye at the Money Debate.

“I regard it as unfortunate that the exam creators at the CII and elsewhere continue to regard MPT as holy writ. More than 10 years of increasingly sceptical academic commentary has yet to make it into the exam syllabus.”

Er quite. But isn’t it time the CII justified itself? If the papers are behind the curve or worse just propounding something that is wrong, then surely it is time to adapt things or if not to explain why not. “Theory used as basis of much investment advice is out of date” is not a great headline for the sector. Last thing it needs in fact. Views welcome.

At the Money Debate we can’t help but refer readers to a rather fiery pensions argument on Henry Tapper’s linkedin group/website/plan for world domination, the Pensionplaypen. It really is too good to miss.

On several occasions, in the last few months, John Lawson pension expert at Aviva has been hitting back at advocates of the Dutch solution which has suddenly got much more timely now the pension minister is also making noises in that direction.

It’s worth reading if only for John’s views of the Royal Society of Arts. It’s the biggest pension row in the neighbourhood at the moment.

Finally, it looks like China is having a credit crunch of its own, but one significant reason is the existence of a shadow banking sector running off the balance sheet (or on another balance sheet!) in many of China’s banks. There may be $2trillion in shadow banking according to Fitch but some of it is in the form of short term ‘wealth management’ products which circumvent centralised controls of lending. Could this be the first time something akin to retail misselling and misbuying has threatened the global economy?