However, financial secretary to the Treasury Mark Hoban defended the FSCS levy and the RDR against the claims, made during a debate in Westminster today.
IFAs are “sometimes the only providers of financial advice in small communities”, Chris Leslie, Labour MP for Nottingham East, told MPs.
He warned that the RDR would have a direct impact on the ability for rural communities to access financial advice.
Concerns about attaining the new qualification requirements and the abolition of commission “need to be handled far more carefully”, he said.
Leslie also highlighted the pressure being put on rural IFAs by the FSCS levy.
All these factors “put in jeopardy the ability for individuals to get free or low cost financial advice”, he told MPs.
However, Hoban was keen to clarify advice is not free and said the FSCS and RDR were necessary for consumer confidence.
“The advice IFAs give is not free. It is paid through commission and going to fee-based will help to improve transparency,” he said.
Defending the aims of the RDR, he claimed he had had to “deal with too many cases where consumers have been given bad advice”.
Hoban also challenged the points made by Leslie on the FSCS and backed the current system.
“That pays for the cost of failures among IFAs and gives consumers confidence in case something goes wrong.
“If he thinks the FSCS should be reformed he should be clear who should pay up the levy.”
The current system made sense as it means each sector “picks up their own smoke”, he told MPs.
