Could the RDR be the biggest regulatory cost under-estimate ever?

The RDR is to cost somewhat more than originally thought, reaching perhaps as high as £2.6bn. Er quite. When the £430m one-off and £40m ongoing cost was suggested around 2009 (and actually I think earlier than that in consultation), it was obviously one of the biggest underestimates in regulatory history. However it was also very difficult to prove this was the case. One could talk to advisers, providers and wraps but they found it difficult to put a figure on it while being wildly sceptical about the regulator’s figure as well.

Having a low estimate presumably helped get the project underway – much as grand architectural and building schemes and Olympic venues also seem to come in well above the original estimates. Costs of billions might have seen ministers baulk at the RDR and seek a cheaper option. Maximum commission cap anyone?

But what about in future? The only thing I can suggest apart from thousands of practitioners gathering outside the regulator’s offices to shout ‘you’ve got yer sums wrong! from time to time, is for some outside body to check and approve the FSA or FCA’s calculations.  That would bring another regulatory cost of course.

Outside of that, perhaps the industry needs to consider working out how much regulation is adding to the typical cost of advice and products and separating it out, much as US shops make the sales tax a separate item. Maybe we need to start applying a value for money test to regulation.