I can still remember December 31 2012 well – the industry was expecting fireworks, and not because of any New Year celebrations.
After what felt like years in the making, the Retail Distribution Review went live.
Advisers were busy making sure their qualifications met the new higher minimum standards, but the biggest change was the ban on commission for investment products and the move to a more transparent fee-based adviser charging.
Where providers offered it, clients could instruct them to deduct an adviser charge from their product, avoiding ‘writing a cheque’ and offering tax efficiencies for pensions.
The RDR did successfully deliver on two key aims.
The cross-industry requirement for Level 4 minimum qualifications heralded a levelling up of professionalism.
More transparent adviser charges and the elimination of concerns over commission bias also made real inroads into improving trust in the advice profession.
But the biggest downside of the RDR, which had been widely predicted, was an increase in the advice gap.
While the Financial Conduct Authority found only limited evidence of this in its 2014 post-implementation review, anecdotally, the general industry view was those with less to invest were often no longer viable to advisers because the inherent cross-subsidy within commission had gone.
The joint Treasury/FCA Financial Advice Market Review with its hard to pronounce FAMR acronym followed in August 2015, charged with closing the advice gap in its widest sense.
It produced 28 wide-ranging recommendations across three key areas, looking at affordability and accessibility of advice as well as sustainability of adviser firms. Even pension dashboards got a mention.
Rolling forward till 2020, the post-implementation review of RDR and FAMR found a lack of support for customers with more than £10,000 in cash who might benefit from investing excess cash for growth.
Another finding was a reluctance from firms to develop "more tailored guidance" because it might be classed as advice. The review also referenced that the EU-derived regulatory regime might not help here.
Which brings us, 10 years on from RDR, to some proposed new initiatives to better support customers.
The all-encompassing new consumer duty’s focus on delivering good outcomes includes demonstrating the value of retail customer products and services, including a focus on ongoing advice charges.
Alongside this, the FCA is consulting on a limited core investment advice service, which would allow firms, regulated to give advice, to offer a streamlined advice service to support clients moving excess cash into stocks and shares Isas.
Both the investments within such Isas and the service itself will need to meet the many requirements of the new consumer duty – so careful navigation will be required.
