Double decimation so far – was the RDR worth it and isn’t that the wrong question anyway?

So now we know the magnitude of the drop. We have seen a huge fall off in adviser numbers, by a fifth. It’s more for bank advisers and that was before Santander closed its advice sales force. The FSA told us the numbers – almost in its dying act – reported here in Money Marketing. Certainly some advisers will have brought forward their retirement so perhaps some of that number represents an acceleration rather than an absolutely forced exit.

But whatever those details and the motives, the fall is huge. Unfortunately, the Money Debate suspects this is before the charging reform really bites in terms of the cash flow strain. So was it worth it is the wrong question.

Here’s the right one. If we accept that many aspects of the RDR are good for the industry and for clients, could it have been delivered in a way that didn’t drive 20 per cent or more from the financial advice sector? We’ve done a little poll around the Money Debate offices and we think yes.

Here’s our suggestion. First there shouldn’t have been a qualifications cliff face. Every adviser who wanted to continue first and foremost should have faced a resit or reassessment. Call it gap-fill plus. Then the  qualifications could have increased by a paper or couple of credits a year, possibly allowing advisers to take the most relevant to their advice business first. A failure to engage with the process should then and only then have led to people no longer advising.

Second. Cap commission at least in the interim. Sort it with the OFT. (Get the Chancellor to call them. He is within his rights do so on consumer protection grounds. That’s the view of our constitutional expert at Money Debate towers.) Regulators could have monitored the market to see what the cap was doing. Note that under a commission-capped scenario, consultancy charges wouldn’t be getting worryingly high and possibly facing a ban. Intriguingly commission in this scenario is more controllable.

If the commission system had then continued to be abused, then regulators could have brought in adviser charging/customer agreed remuneration.

See easy. Maybe not so easy but maybe eaiser. Some things had to change. There was bias. There were risky gaps in some advisers’ knowledge. Advisers who have filled those gaps in the last two years have told me so.

But we are well on the way to losing a quarter of advisers from the market. Just when we need advisers, especially for middle Britain, while upper middle Britain is getting all the advice. Double decimation so far is not good news. There had to be an intervention. But maybe not the way it happened. And it’s too late now.