PIMFA’s Liz Field highlights unintended consequence of RDR | Ten Year Retrospective

by | Aug 9, 2021

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Liz Field

Part of our series of retrospective blogs celebrating IFA Magazine’s ten year anniversary. Liz Field, Chief Executive of PIMFA, identifies the introduction of the Retail Distribution Review as a defining moment of the past decade, with it transforming professional financial advice largely for the better. However, Liz also calls one unintended consequence of the RDR to attention.

The last decade has seen a huge amount of change within our industry with probably one of the biggest changes being the introduction of the Retail Distribution Review (RDR). The RDR has changed the landscape of advice, in many ways for the better, but there has been at least one unintended consequence that we at PIMFA are determined to address over the coming years.

 Among the pluses over the last ten years the RDR has led to greater professionalism within the advice sector, as a result of increasing pressure on advisers to gain recognised qualifications. We’ve also seen wealth managers widen the services they offer to include financial planning and advice and provide a more holistic service to their clients overall. Banks have begun to return to the advice market too, partly as a result of the ring fencing of investment banking services.

But the number of people that receive advice has remained stubbornly low. Just 10% of the UK population say they have ever taken financial advice, while 79% say they have no intention of ever doing so and 62% saying they don’t feel they need help with their finances. Cost is often cited as a large factor, driven by the reforms brought in by the RDR and MIfid II, but also increases to the Financial Services Compensation Scheme (FSCS) levy, which has over the last decade become a safety net for bad actors within our industry as much as for consumers.

Advances in technology have played their part too, with the rapid adoption of fintech and robo-advice platforms combining lower cost entry into the investment market with consumers’ self-belief that they don’t need help to manage their finances.

These are challenges that, as an industry we can and must address in the next decade through the provision of a lower cost and simplified advice model and through the provision of advice that accommodates advances in technology through the offer of more hybrid advice services.

We also have an opportunity to reshape the way our industry is regulated, now that we have left the European Union, reduce many of the cost pressures we face, and concentrate on offering more innovative advice services to a wider cohort of British society. The next ten years could well see far greater change in our industry than the previous ten years have but they are likely to be largely positive and I’m sure IFA Magazine will be there to document them all.

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