Scottish Widows highlights risk that RDR may restrict the provision of advice

to mass-market customers

Scottish Widows has raised concerns that the latest proposals contained in the Financial Services Authority's consultation 09/18 Distribution of Retail Investments: Delivering the RDR could undermine the objective of the RDR of increasing consumer trust as less people may receive advice.

Scottish Widows welcomed the consultation report and supports the FSA's pursuit of a step change in professional standards as it is an essential component to help restore consumer trust, deliver improved outcomes and attract new talent into the industry.

Robert Kerr, Head of Retail Distribution Development at Scottish Widows explains: "Our key concern is that the RDR proposals will act to drive advice upmarket, with financial advice becoming the preserve of the wealthy leaving mass market consumers un-served.

Our research reveals that over half of consumers (54%) said that paying a fee for advice would make them less willing to seek advice and of these, over four fifths (84%) said they would look for an alternative or make their own arrangements rather than pay a charge to an adviser.

The FSA's current proposals could therefore have the unintended consequence of disenfranchising those people who need assistance the most.

"In light of these facts, we strongly urge the FSA to develop some means of ensuring that this does not occur.

To avoid significant consumer detriment, it is therefore critical that other advice models which are able to deliver appropriate, quality advice to the mass market are developed.

We believe that simplified advice could be used to extend access to consumers for savings, investment and protection products.

In addition, Scottish Widows believes that the FSA's intentions to remove factoring from the regular premium market is a further blow to consumers as it will reduce their opportunity to receive advice on long-term savings.

Factoring provides very real consumer benefits and Scottish Widows strong view is that the risk of bias is tolerable and capable of being managed.

Scottish Widows believes a compromise exists whereby the cost of advice can be recouped over a maximum of five years.

This will act to align the best interests of both consumers and the industry.

Scottish Widows also stated in its response that: It is important that the FSA provides clarity over its expected advisory landscape as a result of the implementation of RDR to help businesses migrate to the new models.

The RDR proposals should be given the opportunity to prove that they can deliver consumer benefits, prior to increasing the scope of the RDR.

Simplified advice is potentially an attractive service for a range of consumers and advisers.

However, greater alignment of the advisory firms, FSA and FOS is required before any proposals can move forward.

The company supports the FSA desire in setting out to deliver a level playing field between advice services and product provision.

However, the solutions proposed to implement adviser charging in the mutual fund market appear to characterise the criticisms being levelled at the insured market.

The company remains concerned that the timescales for EU activity on Packaged Retail Investment Products are not aligned with the RDR timescales and there is a real likelihood of a divergence in approach and outcomes.

Robert Kerr, Head of Retail Distribution Development at Scottish Widows, added: "We believe it both appropriate and timely that the FSA undertakes this review as it is essential that customer confidence in retail financial services is improved.

However, great consideration and care is required to appropriately determine its implementation and what should be within the scope of the RDR.

If the RDR results in a marked contraction in advisory capacity and fewer consumers receive advice, the RDR can not be considered to have achieved its objectives.

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