Abstract
Purpose – The purpose of this paper is to review the effect of reforms to the UK’s retail advice sector as a result of the Retail Distribution Review (RDR).
Design/methodology/approach – The paper takes the form of a review of the RDR in the context of the Financial Advice Market Review (FAMR).
Findings – There is a lack of clarity, experienced by both consumers and financial advisers, concerning the nature of “advice”. This results from the use of an array of regulatory and non-regulatory terms. Whilst enhancing professionalisation and reducing commission bias, the RDR is failing to address the needs of many financial consumers – identified by many as an “advice gap”. It is argued that the focus of the RDR, and previous reforms, on addressing market failures may be misplaced.
Practical implications – The paper provides an analysis designed to help in the process of developing a retail advice sector that meets the needs of consumers, in the context policy reforms placing more emphasis on the responsibilities of individuals for financial planning.
Social implications – The study has the potential of better outcomes for consumers and reputational returns for the financial services sector.
Originality/value – This paper is a review of the current regulatory issues facing financial advisers and retail consumers in the context of the RDR and FAMR.
Design/methodology/approach – The paper takes the form of a review of the RDR in the context of the Financial Advice Market Review (FAMR).
Findings – There is a lack of clarity, experienced by both consumers and financial advisers, concerning the nature of “advice”. This results from the use of an array of regulatory and non-regulatory terms. Whilst enhancing professionalisation and reducing commission bias, the RDR is failing to address the needs of many financial consumers – identified by many as an “advice gap”. It is argued that the focus of the RDR, and previous reforms, on addressing market failures may be misplaced.
Practical implications – The paper provides an analysis designed to help in the process of developing a retail advice sector that meets the needs of consumers, in the context policy reforms placing more emphasis on the responsibilities of individuals for financial planning.
Social implications – The study has the potential of better outcomes for consumers and reputational returns for the financial services sector.
Originality/value – This paper is a review of the current regulatory issues facing financial advisers and retail consumers in the context of the RDR and FAMR.
Original language | English |
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Pages (from-to) | 140-153 |
Number of pages | 14 |
Journal | Journal of Financial Regulation and Compliance |
Volume | 24 |
Issue number | 2 |
Early online date | 24 Mar 2016 |
DOIs | |
Publication status | Published - 2016 |
Keywords
- financial regulation
- financial intermediaries
- personal financial planning
- retail distribution review
- retail financial services