As the responses to the Chancellor’s speech die down, there’s been a further raspberry for the Chancellor, and for the FCA, from Garry Heath, a former Director General of The IFA Association and the eponymous founder of the Heath Report. And half a cheer for the sceptics who still lament the loss of the old commission model.
The true scale of the RDR disaster was only now becoming evident, he fumed in his latest Heath Report. “23 million UK Citizens used to be able to access advice through banks or the IFA sector,” he thundered. But, “thanks to the regulator’s obsession with creating a commission free market 16 million no longer have access, and if they persist with removing Trail Commission the 7 million consumers still advised will at best drop to 5.5 million, and at worst 4 million”.
Never a man to mince his words, Mr Heath has affirmed that 13,500 advisers have left the industry since the announcement of RDR – and that nowadays “the only consumers likely to receive advice are the seriously wealthy.” Which made it “a mystery” how this could be seen as consumer protection?
“We have a regulator who derives its power from a statute passed by Parliament but is not responsible to anyone; particularly the Parliament that created it,” he declared. “This allows the FCA to embark on this act of vandalism in the sure fire knowledge that no one can stop it. It is an abuse of power – pure and simple”.
The annual cost of RDR is £340 million, Heath insists – and rising. Which rather dwarfs the £223 million pa that had allegedly been lost by mis-selling. And “the failure of the regulator to define “Simplified Advice”, as it promised the Treasury Select Committee 4 years ago, means that there is no sign of alternative distributions big enough to take up the 16 million abandoned consumers.”
The new Heath Report therefore proposes:
- New legislation to restore proper Parliamentary accountability in Financial Services Regulation.
- The suspension of the FCA’s plans to remove Trail commission in 2016.
- The separate disclosure of the advisers’ compliance and compensation costs so that consumers can see the costs they are paying for – over which the adviser has no control.
- The creation of a Royal Commission to define what citizens can reasonably expect from the state and what they should provide for themselves.
You can read the Heath Report at http://theheathreport.com.
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