Hector Sants, FSA Chief Executive, has apologised publicly after arguing that losing 20 per cent of advisers as a result of RDR would be acceptable.
FSA Chief Executive Hector Sants has apologised publicly after arguing that losing 20 per cent of advisers as a result of RDR would be acceptable.
Sants said his intention was not to cause offence but that he was laying out data from the cost benefit analysis underlying the RDR.
He said: “I am certainly happy to say I am sorry if I caused offence and distress.”
He was responding to a question from TSC member Michael Fallon who said there had been “considerable anger” about the comment made during Sants’ appearance in front of the committee in November. Sants replied: “I was asked what those figures are and I think you would have found it odd if I had not been able to answer that question.”
A major concern highlighted at the time was that the new rules could lead to many financial advisers quitting their jobs, which could mean that consumers are underserved. Sants insists it would be “very difficult” to judge what would be an acceptable figure to lose as a result of the change.
Ernst & Young foresee the number of independent advisers falling from 30,000 to 20,000 after the rules come into effect. Sants proposes to introduce some form of simplified advice to fill that gap but this would still require ‘simplified’ advisers to take the same exams as independent advisers.
Sants was also questioned about the decision to rename financial advisers either “independent” or “restricted”. Restricted advisers will have the same qualifications as independent advisers but will limit their advice to one area, such as pensions, or a limited product range. However, concerns have been raised that consumers will not understand the terms.
Some commission bias could also still exist after the RDR takes effect as products sold before 2013 will continue to pay “trail” – an annual 0.5 per cent fee to the adviser. Advisers may become reluctant to sell a product paying trail even if it is in the best interests of the consumer.
The plan to ban commission as part of the RDR has been on the table since 2006 giving plenty of time for these concerns to be raised and further amendments to be demanded.