The Treasury Committee has issued its report on the Retail Distribution Review. Disappointingly it has missed the elephant in the room. The bulk of investment products are now distributed directly or indirectly by IFAs through platforms. Nowhere in its report does the Committee address this issue which eloquently demonstrates that it has failed to grasp how the industry works. Instead it focuses its attention on the issues of an ageing and poorly informed industry that is a sales force masquerading as an advice network. While there are real issues about the quality of advice provided to the public the main problem the country faces is a lack of savings, not the wrong type of savings. In an environment where defined benefit pensions are now mostly restricted to those employed by the state the urgent need is for individuals to at least save something, even if it is perhaps not the best available. Surely any advice is better than no advice. The admission by Hector Sants of the FSA that he expects, and is comfortable with, a 30% reduction in the number of IFAs as a consequence of the introduction of the RDR is a chilling demonstration of how out of touch this organisation is with those it is supposed to be protecting.

If people are to be encouraged to save for their own future, and it is hard to argue otherwise, then surely the Government should ensure that it is as easy as possible for them to do so. The current structure has grown like topsy driven by the vested interests of the established product provider and distributors, not the consumers or new low cost product providers.  In other industries, airlines for example, new entrants have been able to win business by offering lower prices directly to travellers by promoting themselves through the press and new media. Imagine how much progress Ryanair (LON:RYA) and  Easyjet (LON:EZJ) would have made if they had not been allowed to advertise their prices and were forced to sell only through travel agents? Cutting out the middle man has been a key part of the process in reducing the cost of air travel.

That option is not available to investment product providers because of the requirements imposed by the FSA and this has entrenched the position of…

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