RDR looks good for its age
Overall, however, the impact of RDR should be described as positive.
This can most easily be seen in the data captured by the FCA, which show massive increases in the fees taken by advisers over the past decade.
Customer charges grew to £4.5bn from more than £995mn between 2013 and 2021, while the number of retail investments paying commission dropped by 52 per cent over the same period.
Consumers are seeking, and paying for, more advice than ever, and so from the perspective of the regulator the reforms have had the desired effect.
Moreover, the purveyors of that advice are more transparent about why they suggest certain products.
RDR has put a clear onus on individual accountability. Indeed, the removal of product bias was so successful that the model was exported to the EU in the form of Mifid II.
The measures introduced in RDR have generally aged well. The statistics, when measured against what the regulator wanted to see happen, are impressive, while the accountability and professionalism measures have made a noticeable difference.
The reaction to the greater independence of advisers has been more muted; however, this is understandable given that it is less immediately obvious to consumers than the fact that advisers charge for advice. It has nonetheless been good for the industry and for consumers.
As an additional benefit, some firms decided to extend the scope of RDR to professional clients, as a way of making life operationally simpler.
This ‘gold plating’ of the regulations meant that professional clients were offered the same level of investor protection as retail clients.
Looking ahead to the consumer duty
The consumer duty will touch on the legacy areas of RDR such as adviser charging, disclosures and supporting client investment needs.
It will require firms to deliver good outcomes for retail consumers and sets three cross-cutting rules requiring firms to act in good faith, avoid foreseeable harm and support customers to pursue their financial objectives.
Many of the RDR changes introduced by the FSA 10 years ago touch on these areas and remain relevant 10 years on.
The past 10 years have seen an evolution in the UK’s regulatory approach – spearheaded by RDR, Mifid II and now the consumer duty.
The regulators’ priorities and direction of travel are clear: more and better consumer protection.
Some in the industry complain that regulatory regimes have become too burdensome, and that this is making it challenging to be cost effective, especially in broader markets.
This is largely where the divides in opinion on RDR were – and where they will likely be for the consumer duty too.
Paul Shipton is a consultant at Bovill
