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After RDR - A regulatory dividend for advisers.

The aim of RDR was to improve the delivery of investment advice for consumers. In the words of the FSA:
"It is establishing a resilient, effective and attractive retail investment market that consumers can have confidence in and trust at a time when they need more help and advice than ever with their retirement and investment planning."

Higher professional standards and the elimination of (supposed) commission bias should reduce the risks that consumers face. For a risk based regulator, reduced risk should entail reduced supervisory effort.

We also know from the FCA's own numbers that the market is nearly 25% smaller than it was two years ago. The number of individuals able to give investment advice has fallen from 41,000 to 32,000, 21,000 of whom work in financial advice firms.

See our report "The Adviser Market: In Numbers" for a picture of the adviser market immediately prior to RDR.

APFA believes that in this new landscape there should be lower regulatory costs, both direct and indirect. We need to make it easier for advisers to do business and to look after their clients. We need to encourage more firms to develop talent to provide the advisers of the future and to encourage more young people to join the profession.

In light of its new competition objective, we think the FCA should share these aims. It must recognise that a healthy number of advisers is good for clients and that there are things the regulator could do to help deliver this.

APFA is therefore campaigning for a reduction in the regulatory burden on financial advice firms.

This isn't about lowering standards. It's about creating an environment where it is easier to do business so that, following a 25% fall in adviser numbers, the industry can begin to rebuild itself. For example:
  • Fees - We believe that following RDR, the reduced risks to consumers means that less regulatory resource is needed to supervise advice firms. We are therefore calling on the FCA to look again at the way it allocates costs to advisers and reduce their share of the bill. We are also calling on the FCA to reduce its total budget, and not to increase the amount it raises for the next three years. Read our response to the FCA fees consultation paper. We're also engaging with the FCA as it conducts a review of its fees methodology. We'll be updating members as the review progresses.

  • FSCS threshold for investment intermediaries - The FSA's case for increasing the FSCS threshold assumed that revenues, and therefore profits, of the advice sector will not fall below 2010/11 levels following the implementation of RDR. We will be monitoring the financial impact of RDR through our work on The Financial Adviser Market: In Numbers and if we see revenues and profits falling, we will be asking the FCA to reverse the increase in the FSCS threshold.

  • Reporting requirements - Research from APFA shows that adviser firms spend on average 24 hours a year on RMAR reporting, at an estimated cost to the industry of £10 million. We are asking the FCA to look again at the data it collects from firms. We believe it needs to be able to explain exactly what it does with every piece of data it collects. If it can't explain what it's needed for, it shouldn't be collecting it. Read Linda Smith's blog for an example of some of the problems with the RMAR. We're also asking the FCA to look again at the deadlines for submitting data and to increase the time to report from six weeks to three months.

  • Consumer credit - The FCA will be taking over responsibility for consumer credit in 2014. We want to ensure that the regulation of firms where consumer credit is incidental to their main business, such as advisers, is proportionate to the risks they present. For example, advisers whose clients pay in instalments should not be treated in the same way as payday lenders. The FCA's regulatory approach, and the resultant fees it charges to firms, needs to reflect the very different types of risk. Read our most recent newsflash on consumer credit.

  • Longstop - The FSA gave a commitment to Parliament that the FCA would consider whether to investigate the case for a longstop as part of its business planning for 2014/15. We will be pressing the FCA to make good on this commitment and to look again at the issue of a longstop for advisers. Read more about our Fair Liability 4 Advice campaign.
We'll keep members updated on our progress on these and other issues where we believe the regulatory burden can and should be reduced.

If you have any views or comments about our regulatory dividend campaign, feel free to email APFA.
APFA's campaign on:

>   Costs of regulation
>   PDF The Financial Adviser Market: In Numbers
>   PDF The Advice Market Post-RDR
>   APFA announcement on FCA fees
>   APFA research
>   Consumer credit
>   Fair Liability 4 Advice

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