Why the RDR’s supposed beneficiary is in danger of being forgotten
Be thankful – be very thankful – that the consumer press virtually never mentions the Retail Distribution Review (RDR). For if it did, the financial services industry would be forced to hide its collective head in shame.
We’ll consider the reasons personal finance sections ignore RDR later. But if they did take notice, what would they see?
They’d run into an industry so obsessed with its self-importance it completely sweeps customers to one side. No, that’s not fair. It does not push them away, it has no interest in them in the first place.
For in all the millions of words about RDR in the trade press, how often do the ‘C words’ – customers, consumers, clients – appear? Hardly ever. And, difficult to imagine, there’s even less attention given to asking ‘C people’ – those, remember, who pay your wages – what they want on protection or investment issues.
It’s almost as if the triangle of firms, regulator and customers has become a straight line, cutting out consumers from the geometry. I’ve been told the RDR is none of my business because it’s the business of the professionals who earn from financial services. So the RDR debate is seen as the exclusive parish of providers and advisers.
Imagine how other retail areas would look if they adopted this attitude. If incumbent booksellers had maintained the cosy arrangement with publishing houses they once enjoyed where prices were fixed and receiving an out of stock title routinely took six weeks. Amazon and its clones? Forget it.
There are exceptions. Trevor Matthews, the Friends Provident chief executive, says: “We need to bridge the gap between what we do and what customers prefer. It is our responsibility to reach them, not their responsibility to reach us.” So one cheer for Trevor. And a second for talking about “recognising we are not the consumers’ most favourite people” although he fails to get a third cheer by adding “at the moment” as if it is only the recent financial crisis that has heaped opprobrium on the sector.
And then there’s the sheer amount of time the RDR has – and will – consume. The Financial Services Authority (FSA) launched the RDR three years ago in 2006 when it announced that it wanted to clarify different service types for consumers, raise professional standards and reduce the conflicts of interest in remuneration practices while improving transparency of advice costs.
While even getting to this first base took a few years of RDR pre-discussion, who could argue with these fundamental measures? They are motherhood and apple pie.
Leaving aside why it took nearly two decades from the passing of the Financial Services Act 1986 to reach RDR, consumers may well wonder why they have to wait years more to see results.
The FSA has said that the RDR should be in operation by 2012. Ignoring the preamble discussions, that will still mean over six years from launch announcement to operation. Compare that with other events. The second world war, for example, where it took the same six years to defeat the Nazi machine. Or perhaps look at civil engineering where six years or so was enough to build the Channel Tunnel – the new high speed line from St Pancras only took four years.