The FCA has published its response to the Heath Report Two (THR2) and has provided comments on the numbers and methodology it used to determine the impact of the Retail Distribution Review (RDR) of the market for retail investments.
The FCA’s response sets out its views on the conclusions of THR2. In summary, the conclusions of THR2 were as follows:
- Since RDR was announced 13,500 advisers have left the industry.
- Historically, 23m consumers have accessed advice via Independent Financial Advisors (IFA) and banks. Since RDR was announced 16.5m consumers no longer have that access.
- If trail commission is banned in 2016 then the IFA sector will lose between 7,260 advisers and 15,510 advisers with an associated consumer capacity of 1.4m to 3m consumers.
- RDR will cost the consumer £340m pa (with no associated consumer benefit).
The FCA notes it will continue to monitor the impact of the RDR and developments in the sector. The FCA has been working alongside HM Treasury to identify ways of increasing access to advice through the Financial Advice Market Review (FAMR). The FCA remains of the view that the RDR is delivering positive impacts such as improving adviser professionalism and reducing product bias. FAMR, however, recognised the challenge that those without significant assets or income may have in obtaining appropriate advice or support with financial decisions.
The recommendations from FAMR were published on 14 March 2016. The report sets out a series of recommendations intended to tackle the barriers to consumers accessing advice.