RDR risk mitigation essential to prevent consumer detriment – TISA Distribution Advisory Council publishes response to RDR consultation
TISA – Tax Incentivised Savings Association – is calling for the development of a risk mitigation strategy if the Retail Distribution Review (RDR) is to be implemented effectively and without unnecessary additional costs being borne by the consumer.
In its response to the Financial Services Authority RDR Consultation Paper TISA warns that implementation costs are being seriously underestimated and that as a result product charges will have to be raised.
TISA is concerned that consumers will also face an increase in the cost of advice due to a scarcity of advisers, whilst the move from commissions to fees will mean more consumers will have to pay VAT on the advice received.
David Hazelton, Head of Business Development at Raymond James Investment Services and Chairman of TISA’s Distribution Advisory Council, says adviser charging could lead to a situation where regular contribution products will look unattractive to consumers:
“As most consumers have built up their lump sum investments from regular savings this could have the unintended consequence of actually increasing the savings gap".
Six key potential risks to consumers have been identified by TISA:
• Access to independent advice will be limited to HNW clients
• Many advisers will exit the sector or not be sufficiently qualified by 2012
• The cost of advice will increase due to the impact of VAT and a scarcity of advisers
• Product costs will increase due to the need to pay the costs of implementation which in any event may have been seriously underestimated
• Confusion about the different tiers of advisor status may deter some from seeking any advice
• Discouragement from long term regular savings in favour of excess life assurance.
David Hazelton adds:
“The RDR is providing an important stimulus that will force out the worst excesses of the industry and move it towards a professional footing. However it is essential that RDR is implemented effectively if it is to achieve maximum benefits at the lowest cost. We need to identify and face up to the risks now if we are to ensure that the RDR delivers for all consumers.
” TISA’s response also recommends the inclusion of protection and mortgage products within the scope of the RDR to prevent ‘rogue’ advisers migrating into this market to the detriment of consumers.
Ends
For further information, please contact:
David Hazelton, Chairman TISA Distribution Council and Head of Business Development, Raymond James Investment Services Limited – Tel +44 (0)20 7096 6741 Email: david.hazelton@raymondjames.com
Malcolm Small, TISA Director of Portfolio & Retirement Planning – Tel: 07989 500771 Email: malcolm.small@tisa.uk.com
Issued on behalf of TISA by Cauldron Consulting, contact Steve Radford – Tel: 020 3178 7238, Mobile: 07889 903786 Email: steve.radford@cauldron-consulting.com
Notes for Editors
The Tax Incentivised Savings Association (TISA)
TISA is the premier trade association in the UK retail savings and investment industry. By engaging with member firms, government, political parties, regulators and consumer groups TISA’s ultimate goal is always to further consumers’ best interests. It seeks to improve the range, features and quality of savings and investment schemes available whilst at the same time encouraging more people to save for their financial security and peace of mind.
Uniquely, TISA is able to articulate the opinions of the whole savings and investments marketplace through its membership comprising over 120 member firms involved in the supply or distribution of products to the sector and its consumer interest. TISA’s remit extends across the broad spectrum of government sponsored savings and investment vehicles including:
- Individual Savings Accounts (ISAs)
- Child Trust Funds (CTFs)
- Savings Gateway
- Personal Pensions
- Investment Bonds
- Employer based pension schemes
- Wraps and platforms
- Other consumer-centric savings schemes and initiatives.
HM Government uses TISA’s market knowledge and ability to represent the views of both the savings and investments industry and consumers to help it to formulate its policy in this area. Recent TISA successes include improvements to the ISA, the regime in which ISAs operate and simplification of the CTF.