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Advisers should treat RDR with a sense of pride

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Mel Kenny - grey

If I was an over-cynical type or it was one of those days in London where heavy clouds linger overhead all day, I could be forgiven for thinking there are huge numbers of people making a heap of money out of the RDR one way or another. And that is ignoring IFAs.

There is the business consultancy that sets out to carefully wean IFA firms off the commission drug and transform them into shiny, sparkling businesses with salespeople. Then there are the alarmist consolidation firms that gobble up fearful IFA businesses, providing carrot-dangling exit strategies, the promise of a golden retirement and consolidation options, creating one big monster.

Then the FSA, the godfather of them all, has produced one paper after another, creating twist after twist, employing many man hours in the process. Finally, we have the CII. It seemed to be churning out one exam after another until it became too much to bear, so then came gap-filling. And yet for some IFAs incomes have fallen or are under threat.

For sure, there are firms and advisers which have grabbed the bull by the horns and welcomed the changes and whatever new challenges come along. There are plenty more who are not there yet but have started the journey. Meanwhile, the laggards now compare badly with the others, falling even further behind as demands increase and looking on in envy or disdain at such trumpeting. And to start now - well, they would need to lie down in a dark room and not come out for a few days before making any attempts.

This is not an RDR moan. The FSA has given us plenty of warning and the drivers are nothing new. Financial DIY has grown, life insurers would go bust under the old model and every bear market leaves the traditional commission-based adviser badly exposed. RDR can be the saviour of the blissfully delusional transactional IFA and, what’s more, the industry will increase in stature as a result of greater professionalism.

For me, the new model is becoming more of a reality. The qualifications bit was relatively straightforward. I became a chartered financial planner at the age of 37, quietly racking up exam passes, benefiting from being part of the younger generation used to exams. I was lucky. However, at the graduation ceremony, I saw a huge range of ages collecting their gongs. It was a reminder that it is never too late to learn and the profession would be worse off for losing those with a wealth of experience. Looking around the room of graduates, I saw a lot of pride, so, if nothing else, do it for yourself. Make a start and get that diploma. Use the new regime to build a rewarding career as a truly professional adviser.

Mel Kenny is a chartered financial planner at Radcliffe & Newlands

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Readers' comments (28)

  • Fantastic article, Mel. I agree with everything you have said here.

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  • I agree with everything you said apart from 'I was lucky'. There is little luck involved in what you have achieved (I am sure you know this) you just applied yourself and put the effort in.

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  • I do not agree with everything that was said! Why does the FSA feel that it is necesssary to keep imposing new regulations? Why do they have the view that commission is wrong - what has it got to do with them? Commission is a commercial practice (not regulatory) and it has worked for many years, with clients and IFAs being happy with it. There are lots of clients who do not want to pay fees. For those IFAs who want to work in a fee environment, good for them, but they should not impose their views on everyone else.

    Likewise, why should IFSs, particularly the older ones, keep having to take more exams? We benefit from a wealth of experience. This should be left for each person to decide for themselves.

    The FSA admitted a while ago that RDR was wrong, but that they were too far down the line to change it without embarrassment.

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  • easy to say at 37!

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  • RDR is a structure without foundation, a house built on straw. The big question remains: What benefit it will have for the ultimate consumer? I am not convinced that all of these changes will actually give rise to "any" consumer benefit. In fact the opposite will be the case..

    STATEMENT: “The FSA has given us plenty of warning”.

    FACT: It is a matter of fact that it was not until the "middle of 2010" that the FSA announced its level 4 requirements.

    STATEMENT: “The industry will increase in stature as a result of greater professionalism”.

    FACT: This has not been evidences with any other professional group. The Legal Complaints Service (LCS) investigates complaints about solicitors handling over 300 complaints a day: The Solicitors Disciplinary Tribunal’s (SDT - a division of the High Court) Annual Report revealed that up to 17,000 Solicitors per years were reported to the Law Society for action.
    When you bear in mind that the LCS can only look at a case against a solicitor within 6 months of the act being complained of and they can only investigate maladministration and fee disputes that’s a pretty high figure for a ‘FEE BASED EXPERT’, especially when you realise that the IFA is subjected to an unappealable, compulsory, summary jurisdiction making awards as great as £150,000 and all with no protection from the Statute of Limitations and no 15 years long stop.
    If you want to improve the professionalism of IFA start to look at the professionalism of those who regulate them!

    Six years of exams and a very restricted complaint definition didn’t stem complaints against solicitors and level 4, 6 etc will do nothing for IFAs!

    STATEMENT: “Life insurers would go bust under the old model”

    FACT: Oxera, the market research firm employed by the FSA expects the initial net present value of the compliance costs to the industry to reach between £1.4 billion and £1.7 billion. If you look in more detail the FSA’s own cost benefit analysis you will see that they now estimate the 10 year cost as £3.55bn!

    Whilst there may be benefits in RDR one should not be blind to the reality that RDR is ill thought out. The loss of 30% of advisers is not the solution to the largest savings, retirement and protection gaps in its history and the solution will not be met by a small band of fee charging chartered financial planner based mainly in the City of London.

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  • You can't live on pride!

    I loathe these 'holier than thou sorts' who have client banks with clients who are willing / able to pay there exorbitant hourly charge while in the real world where probably 85% or more of us really work it will not work!

    If you can't do work for 'free' - how on earth are you going to charge a decent hourly rate to make a profit!!!

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  • I think communism is a great idea. Unfortunately based on all the evidence, it simply doesn't work.
    I thought stakeholder was a great idea, but I didn't think ti would achieve it's (stated) aims.
    I think a lot of the ideas in RDR are really good ideas and probably will work in time. The point is, that based on the FSAs own predictions, the RDR will be damaging to the consumer in the short term but better in the long term.
    So I will make the same statement I have made before. Whether you are pro RDR or anti RDR, the FSA should have a rethink on the timeline to allow for a lot of the devil in the detail to be resolved as with just over 18 months to go to the cliff edge, the detail for a lot of things and the unintended consequences of the FSAs proposals are only being realised by some NOW. I don't think it would need the timeline to move much (and preferably be staggered), for RDR to be a succes in both the short AND long term. But personally, with it's current deadline, I believe it will be bad for the consumer in the short AND medium term.
    I will be RDR ready by Dec 2012 (and in fact probably be Dec 2011), as we already working on adviser charging, have capital adequacy in place based on the new rules and I passed R04 last Tuesday, so am a step nearer to finishing the (current) qualification requirements.

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  • I agree with nothing you have said, all three of you should be ashamed of yourselves and apply now for your new roles with the new regulator your just what they are looking for.

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  • Good for you Mel. Enjoy the future....

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  • I believe in freedom with responsibility. This means that I believe in self-responsibility, in high ethical standards and in freedom of choice.

    Let us consider these points. Self-responsibility for me as an adviser means being expert in the areas I work in and limiting my advising activities to those areas.

    It means acting with morality - effectively treating clients as you would wish to be treated.

    It means allowing clients a choice of the type of adviser they wish to use and the type of payment sphere that they wish to be advised within.

    So, we have a wide range of advisory structures and a wide range of client preferences. With the RDR the FSA is adopting the Henry Ford route of offering any type of regulatory system as long as it's black.

    The FSA has been quite clever in aligning advisers against each other by introducing elitism, advancing the view that higher qualified advisers are suffering by continued connection to the pleb advisers and by beating AIFA into an apathetic stasis.

    Personally, I commend those advisers who seek to clamber up to QCF4 and above. This is one aspect of the way they choose to differentiate themselves. However, anybody that believes that this offers a form of salvation for the consumer, or that it will automatically induce super-ethicality, is dreaming (or is a here today gone tomorrow regulator).

    I have no doubt that Mel Kenny is an excellent adviser with many satisfied clients but treating the RDR with a sense of pride is akin to asking the over 65s to applaud the installation of Robert Maxwell as the new Pensions Minister.

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