Blog: Quality vs quantity

The key aim of the retail distribution review (RDR) is to remove consumer detriment.

We are told the cost will be high.

As an industry we can perhaps accept those costs as long as the goals are indeed achieved.

We are also told that the costs will be small in comparison to the future avoidance of consumer detriment.

As a nation, however, we are living through the most difficult financial crisis since the 1920s and many families are struggling, not just with protection insurance and financial planning but with basic day-to-day household costs.

The RDR itself may be focused on improving the quality of advice; however it could potentially have an unintended effect and reduce the quantity of advice provided to the public.

Regulation has limitations, and needs to be carefully aimed to ensure that it leads to the intended outcome.

Many have discussed how the RDR will affect existing distributors and their customers, but the biggest effect may be on the most vulnerable, many of whom are forecast to be precluded from existing forms of financial advice.

Any regulation runs the risk of unintended consequences.

So efforts should be made to ensure the RDR not only improves existing standards of advice and financial product distribution but that it also addresses questions of the supply of quality advice, ensuring that those who need it can get it - whether this be through face to face contact with an advisor, or through more automated processes.

Before long we will see the FSA become the Financial Conduct Authority (FCA) - which will invariably add costs and also take up much senior management time as the industry's rulebook gets adapted to the requirements of the new regime.

Nevertheless, appropriate and holistic regulation for the future should find a balance between quality and quantity, and serve the needs of the widest base, rather than focusing on improving the outcomes for a narrow segment of financial consumers.

Greg Becker is a product development actuary at RGA