Treasury move sees 10% drop rule ditched

The government’s decision to remove the ‘10% drop rule’ is welcome news for advisers.

This is welcome news for advisers, their clients and the industry as a whole and means 2023 will witness the removal of one of the least effective pieces of regulation on the books.

The 10% rule was designed to ensure customers who'd lost touch with their investments over the years would be re-engaged, but for those already well-served by advisers the notice only created increased levels of administration and, in some cases, anxiety. Investment is all about the long-term and raising anxiety levels in this way always ran the risk of pushing consumers into making poor decisions based on short-term market fluctuations.

The rule required customers to be informed of a drop in the value of their discretionary managed portfolio greater than 10% of the opening value in the quarter. In many cases this only encouraged knee-jerk responses during moments when calm heads were needed. It also created a distraction for DFMs, platforms, and advisers at critical times when their efforts and attention could be more usefully focussed elsewhere.