PFS 2015: Advice review will challenge over-regulation

Addressing a 600-strong crowd at today’s Personal Finance Society conference held in the Royal Lancaster Hotel in London today, Richards spoke of how some advisers have seen their levies increase by three times from last year, with increased costs deriving from the Financial Services Compensation Scheme.

Although regulation is necessary, he warned that too much results in poorer consumer outcomes – as advice becomes more expensive and unregulated alternatives take its place.

The PFS has been consulting with the Treasury on the review, which Richards hopes will shift the state of the over-regulated market.

He said: “It is no good to complain about regulation because we need it in many ways.

“It can deliver good outcomes but actually over-regulation can flip us into delivering poor consumer outcomes.

“That’s why we’ve got to address the future for the good of the public and for the good of the profession. As a united profession we can influence the future direction of travel.”

He added: “[The government are] in fairness looking at how they can better serve the needs of the public [with the review], so the cost of regulation is an inhibitor and they are looking at how they can adjust and respond to that.

“And that’s where we have a great opportunity, because we were invited in to the Treasury prior to the announcement of the FAMR (Financial Advice Market Review) and the first question we were asked was how are we going to solve decreasing access to advice?

“So ladies and gents this could be a significant reform. This is a real opportunity for you to address over-regulation in some areas.”

After giving the speech Richards clarified what could happen if regulation continues to be expensive and cumbersome.

He explained: “Over-regulation has the impact of deterring new entrants to the market or driving behaviours of firms looking to address the advice gap by means other than regulated activity and that in itself doesn’t serve the public well because that gives them no protection whatsoever.

“The sector has been contracting for the last two and a half decades, but we are at the point where it’s relatively stable.

"But even the government recognise that the way in which regulation impacts regulated advice is it pushes it up the value chain at a time when the government reforms are creating an increased demand for advice.”