According to recent estimates from the Financial Services Authority (FSA), 8 per cent of independent financial advisers are set to hang up their spurs when RDR comes into play at the end of the year. There are concerns that the exodus of experienced advisers who aren’t willing to conform to the regulations will deprive investors of their primary source of industry information.
However Stott, client services director at The Consulting Consortium, says that it can only be a good thing for consumers as they will benefit from better service and more transparency about the way they are charged.
"The drop-off of IFAs is great because it is likely to be the ones who aren’t prepared to modernise, to take exams or change their proposition," he claimed.
"In any industry you have loveable rogues who are relationship savvy but are out to make a fast buck out of their customers."
"The RDR was predicated by consumers getting a raw deal from this sort of adviser and is committed to improving the value investors receive."
The FSA’s new regulations are aimed at raising the professional standards of advisers, and demand they adhere to a code of ethics.
Stott continued: "Advisers leaving the industry are also likely to increase competitiveness and that is great for customers.
There will also be more clarity about fees and investors who aren’t willing to pay for advice will benefit from huge strides forward by the larger direct-to-client offerings."
The FSA confirmed last week that fund platforms will fall under the terms of RDR.
While they will not be able to receive payments from fund houses as an incentive for selling their products, they are evolving their business to align their interests more closely with those of investors.
"Personally I think there is huge value in having an IFA who really knows you but many consumers previously served by IFAs on a commission basis will be put off by the fees," said Stott.
"They are likely to migrate to direct business-to-consumer structures. It will be interesting to see what happens. There needs to be a fair value fee structure."
The regulatory specialist thinks it is a shame that the new rules could sound the death knell for traditional advisers who made a living by working closely with their clients and understanding their needs.
However, Stott remains in favour of the changes nonetheless.
"IFAs that have tended to prosper have been great relationship managers," he continued.
"There will be advisers out there who work on the fundamental basis of knowing their clients really, really well – their aspirations, their interests, their families – we’re going to lose some really good quality advisers by prescribing a formulaic approach."
"There’s a lot of cynicism about the way IFAs do things. The old-school product bashers and commission collectors are far too typical," he said.
Chris Spear (pictured), managing director of Derbyshire-based IFA Spear Financial, agrees. "You can have a long-term relationship with a client if you treat them properly."
However, Spear disagrees that clients will be better off after RDR.
"Fee-based advice is going to see a lot of clients doing things for themselves and that means they are going to miss out on a lot of tax-planning opportunities."
"I’m not convinced they will be better off. Fund houses might lose their profitability – who knows what the knock-on effect of RDR will be."