A panel of UK lawmakers has asked for sweeping reforms of the independent financial advisor sector to be delayed by a year from the planned start date of 2013. It warns that proposed changes will drive “competent and experienced” advisors from business. The UK's financial regulator disagreed, however, and said it intended to press ahead.

The House of Commons Treasury Select Committee, which has questioned industry figures and regulators about the Retail Distribution Review programme of measures, issued a critical report on the RDR.

The RDR, which is being developed by the Financial Services Authority, the UK financial regulator, imposes tougher qualifications on advisors and drives out use of commissions on sales to make advice more impartial. These measures are designed to protect investors from biased advice and mis-selling of products, problems highlighted by the 2008 financial crisis and in previous episodes.

Some industry figures, while agreeing on the need for higher quality advice, say the RDR will drive up to 15 per cent or more of IFAs from business, thereby reducing consumer choice for the less well-off investor in particular. Already, the measures are encouraging mergers and acquisitions in the industry and prompting technology firms to sell their services to firms concerned about rising compliance costs.

“We are concerned at any potential loss of competent and experienced advisers from the market. Any restriction of any trade must be carried out with due consideration for the livelihoods of those affected,” the committee said in a report.

“In an effort to achieve the legitimate aim of maintaining competition and choice in the advice market, we recommend that the FSA consider instituting a process whereby it provides for flexibility for advisers on a case-by-case basis….We recommend that implementation of all aspects of the RDR be delayed by twelve months, in order to maintain choice and competition in the advice market,” it said.

The report went on: “We recommend that the FSA temper the ‘cliff-edge’ nature of the current reforms. A system of proper supervision, along with the additional year, would provide some leeway.”

In reaction, the FSA said it “remains committed" to implementing the RDR in January, 2013.

“The RDR is already a long-running initiative with the first consultation paper published in June 2007. There is clear evidence that the industry is well advanced in its preparations, with 49 per cent of IFAs already qualified and at least 82 per cent expecting to remain as retail investment advisors,” it said.

“In recent years, mis-selling scandals and a lack of consumer trust have severely damaged the reputation of the retail investment market. Mis-sold personal pension and endowment policies alone have led to nearly £15 billion having been paid in compensation,” it said.