Despite its Retail Distribution Review's stated aim of making financial advice more professional and impartial, research shows that most advisors think the UK regulator will be the biggest beneficiary of the RDR.

Despite its Retail Distribution Review’s stated aim of creating a more consumer-friendly financial advice industry, new research has revealed that most advisors think the greatest beneficiary of the reform programme will be the UK regulator itself.

The RDR Enquiry, a white paper commissioned by 2Plan Wealth Management, found that 43 per cent of advisors think that the Financial Services Authority will benefit most from the RDR. Restricted advisors and banks emerged as the second biggest beneficiary of the RDR, with 22 per cent of the votes, while clients themselves came at the bottom of the list. Detractors of the RDR warn that the reform programme could mean that large swathes of the UK client base could have their access to independent advice curtailed as a result of the RDR, and this was borne out by the qualitative, interview-based data gathered for the study.

When the RDR comes into force at the start of next year advisors who wish to market themselves as independent will have to show that they are taking a “whole of market” approach and offer advice on the entire spectrum of products. Some advisors lacking expertise in more esoteric investments like unregulated collective investment schemes, venture capital trusts and the like will therefore not to be able to satisfy the criteria for independence and are opting either to outsource investment management or go for a “restricted” advice label. While the RDR has not as yet prompted the exodus from the industry predicted by some, there has been a noticeable trend of smaller, regional IFAs being snapped up by larger players in recent times. 

The difficulty of maintaining an independent status was borne out by 2Plan’s study, in which 45 per cent of the 280 respondents said that the biggest barrier to staying independent was the “additional research and knowledge needed for broader retail investments”. On equal pegging as advisors’ top concern were stricter compliance regulations and FSA standards, also with 45 per cent of the votes. Extra training investment was cited as the biggest hurdle to be overcome by 21 per cent of those polled, while investing in new technologies such as platforms, research systems and profilers was singled out by 14 per cent of advisors as a top barrier.

The need to improve client risk-profiling was the subject of a recent WealthBriefing Breakfast Briefing and research report, published in conjunction with Advent Software. To read an article on the expert views expressed at the event in Geneva, click here.