Shooting ourselves in the foot

Like most IFAs, we are trying hard to be positive about the FSA's RDR.  Based on plenty of past experience, there is always the sneaking suspicion that this is the latest experimental fad from the Regulator.  The FSA's fads tend to be short-lived (remember depolarisation, anyone?) and are usually painful and expensive for the Regulated.  However, the RDR does actually contain much promise, and since none of us want to be negative, reactionary dinosaurs, we square our shoulders and say, "well, here we go, then".

It is, however, in those little - almost insignificant - details that the whole thing lets itself down.  A bit like Gordon Brown's Budgets.

There's one I had almost missed.  There was a piece of tantalisingly brief analysis on the matter in the latest 'Money Marketing' - I spotted it as I used the paper to wrap up the remains of my lunch.  Apparently, the (substantial) hike in the Minimum Capital Adequacy requirement proposed in the RDR will have a much more significant impact on (new model) fee-based advisory firms than it will on (old model) commission-based firms.  Simply because of the way in which commissions are treated within the accounts.

??????

Surely, the whole objective behind the RDR is to move firms away from the old model, into the Brave New World of fee-based advice, because everyone knows that commissions are bad and fees are good?

That's not all, of course.  The sub-text underlying the new stance on professionalism is that the FSA is proposing a whole new bureaucracy to oversee it.  Buried right at the back of the RDR Interim Report, there is a table summarising the budget required - that's another £2m (almost) by 2011/12.  In the cosmic scale of things, compared to how much the FSA already costs to run, this might be regarded as a drop in the bucket, but this will effectively be a new levy on each and every IFA of approximately £40, on top of the direct and indirect costs of upgrading our qualification base.  The FSA's wording implies that this is an insignificant sum - and that's the point:  it appears far too easy for bureaucrats to spend other people's money.