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Advisers should treat RDR with a sense of pride

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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There are 28 comments at the moment, we would love to hear your opinion too.

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

  2. Tyburn Asset Management 21st April 2011 at 3:05 pm

    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.

  3. 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.

  4. 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.

  5. Stephen Rowland 22nd April 2011 at 11:38 am

    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!!!

  6. 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.

  7. 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.

  8. Good for you Mel. Enjoy the future….

  9. 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.

  10. Mel, great article. The PFS Chartered Graduation was a tremendous success and the sense of pride amongst the graduates and their family was super.

    To build a profession we need to grow the diploma plus group. Over 25% of advisers who pass their Diploma are now studying for advanced levels.

  11. I was at a gap fill session last week. I’m 42 and was one of the younger attendees. The percention that older advisers are not going to be bothered about improving their knowledge and qualifications is not true based upon this evidence. There are those who think that their experience should be enough. If their experience is sufficient, the exams should be no problem. If there are gaps in their knowledge, do they not owe it to their clients to be better?

  12. Many Pro RDR advisers use emotive language that assumes the moral high ground which is not yours by right. You use words like: “improving knowledge and qualifications, owe it to their clients to be better” etc etc.

    I say IFA owe it to their clients to challenge the insanity of RDR. You see IFA’s are an intelligent lot with free and independent minds. When the FSA say black is white some of us say no it isn’t black is black.

    RDR is not proven. Even the old friend of the IFA (not) the ABI has concluded this. The ABI found over half of consumers will not be prepared to pay for financial advice, according to research from the Association of British Insurers. The ABI research asked over 2,500 people about their attitudes to financial advice. NB: This research is far in excess of any research conducted by the FSA who really struggled for evidence when asked by the TSC and then came up with an obscure Australian survey of three firms!

    The only other research I could find was the original FSA CP121. At the time of CP121 (2002) I did not have recognised the hordes of disgruntled consumers (as now) that the FSA claimed to represent in CP121. ORC, who produced the CP121 research, based their research on only 20 interviews and no doubt most of these were readers of Which!

    The ABI research carries far more weight with 2,500 consumers asked and the results contradict the FSA premise that consumers don’t want commission!

    The case for RDR remains unproven and it is healthy that unsubstantiated facts should be challenged rather than blindly accepted as fact and yes there will be a small minority who will benefit from RDR but we must be careful about accepting those views as evidence of wider benefit.

  13. Tyburn Asset Management 26th April 2011 at 10:22 am

    oh dear some people are really getting into a tizzy about the RDR. All you have to do is sit a couple of fairly easy exams and move to a more transparent way of charging clients. Don’t take it as a personal assault on your freedoms.

    If you want to go around selling £100 per month pensions and insurance for commission it’s time to move on.

  14. Steven Farrall (Adviser Alliance) 26th April 2011 at 12:06 pm

    The article entirely misses the point about the objections t the RDR. The RDR is fundamentally state coercion. It’s very simple – you do what we say or we destroy your business. Since being an IFA is not a criminal activity this is entirely unacceptable destruction of basic freedom for everyone.

    The point about being better qualified is also moot. It is competiton that drives improvement in a free market and people get better qualified to compete better, not the other way around.

    For the avoidance of doubt I have been trading in a 100% RDR ready way since about 1992, all I am missing is some examinable knowledge of the ludicrous additional bureaucratic rules that have grown up over those nigh on 20 years.

  15. The need for RDR remains a myth and is not supported by informed opinion. RDR will have dire consequences for the industry. The article says the old model is bust! Well on 24/03/11 Friends Provident: Announced that the retail distribution review (RDR) has meant it is no longer viable to market or develop new investment products. In its interim results Friends Provident said the RDR meant that it would not actively market investment products and the insurer has concluded that the costs required to develop an RDR-compliant investment product and the expected margins on the products would not generate adequate returns for shareholders.

    Is this progression or digression?

  16. ‘every bear market leaves the traditional commission-based adviser badly exposed’

    This is still true going forward as many ‘fee based’ advisers take a percentage of a portfolio as a fee on an ongoing basis, and are still exposed to bear markets.

  17. In psychology Stockholm Syndrome is a term used to describe a paradoxical psychological phenomenon where hostages express sympathy towards their captors.

    This explains why there will always be some Libyans and North Koreans cheering for Colonel Gaddafi and Kim Jong-il respectively and why certain IFAs will cheer on whatever ill informed nonsense the discredited and soon to be abolished FSA comes out with – RDR being a prime example.

    And just a further point to those IFAs who are currently sitting the exams to meet RDR requirements whilst singing like smug canaries about how their improved knowledge will benefit thier clients; My question is, if the exams and knowledge gained by taking the exams is of such a great benefit to your clients, why didn’t you take similar exams years ago instead of waiting until you were told you had to?. .

  18. Well said Stephen and Simon.
    Our government has the gall to interfere in other countries citing state oppression as the reason and all the while they allow an unelected unaccountable judicial quango to issue decrees to the effect that if we fail to conform to “one mans dream” they will destroy us.
    Perhaps a sympathetic ally will come to our rescue?
    Those who do not recognise this as a personal assault on freedom are either extremely naive or willfully deluded.

  19. The proof will come after Jan 2014 when we see how many of the remaining “qualified” IFA’s have chosen to pay their FAS Fees after a year of the Fee only model.
    I think IFA numbers will drop 25-30% Jan 2013 and another 40% Jan 2014 when the commercial reality of RDR will hit home for the majority of IFA’s that don’t have large HNWC banks.

  20. I wonder what these comment pages will look like in 2013? Will it be peace and harmony?

  21. Andy | 26 Apr 2011 6:05 pm 26th April 2011 at 7:23 pm

    Andy don’t forget all those broker commissions that the city has not woken up to yet, and might I ask of the FSA will they reduce their fees in proportion to the reduction in regulated advisers -pigs might fly! RDR is an after dinner speech that should never have made it to breakfast.

  22. Advisers should treat RDR with a sense of shame 26th April 2011 at 8:54 pm

    A country or society in ascendency gets it right and conversely a country in descent gets it wrong. The UK financial services industry is the last remaining remnant of Great Britain and here we see the final onslaught and attack designed to reduce even out great financial services industry into mediocrity. The Retail Distribution Review is an invention, a lie told so often it has become the truth. Interrogate the facts and you will find none. RDR has no factual basis and here we have the sycophants clambering to extract regulatory favour through appeasement of an unelected quango, a Stasi like bully. No one in their right mind is against professionalism or higher qualifications but if your argument is so strong why do your seek the destruction of those without these qualifications, after all surely the consumers will flock to your professional status with open chequebooks! Or perhaps it is because you know your argument is week?

  23. I am not far off chartered status myself and when I acheive that it will be with a sense of pride – as I set out on the journey for my personal reasons not some misguided and not mis-interpreted research carried out by the FSA.

    Chartered = Pride
    RDR = wait for the next ‘inniative’ from someone trying to justify their position at the FSA or what ever replaces it

  24. 1. I already “adviser charge”.
    2. I sat and passed R04 last week and will (hopefully) sit and pass R02 within the next 2 months. R03 and J02 and I’ll be done.
    3. I do however entirely object to the RDR adn entirely agree with Steve Farrell’s comments.
    4. I am concerned that “andy” is right and large numbers of IFAs will leave and not sufficient qualified advisers will be entering the advice sector to replace them and that critical mass will be lost and the whoel advice sector will collapse due to excessive fees.
    5. If 4 above occurs, then the banks and insurers will have to step in (a bit like Hitler being asked by ((I think it was Hindenburg)) to become chancellor of Germany) to off simplified information (IT is NOT advice) and the consumer will have lost out along with their advisers.
    Anyone who thinks otherwise is deluding themselves or is knowigley forcing this collapse in the hope they can build up recurring income and sell their business before a collapse occurs.
    Getting qualified to level 4 is simply about keeping my (and my clients) options open.

  25. Mel you come over a very sincere professional person and I wish you the very best with your future career. I wonder whether you realise just how brave you and your colleagues are to be trying to build this industry into a profession. I totally agree that full financial planning advice should be given by well qualifies people, probably level 6 in all honesty. Sadly the general public will literally take decades to engage with this properly however and in the meantime you will wake up to a very long lost of industry scandals, bank sales horror stories and Keydata compensation bills. As an impartial observer why didn’t you just enter a recognised profession like law and have a proper respected career with the rewards that go with it. You will be long retired before financial advisers are respected as professionals.

  26. Richard Hoblyn FCSI 11th October 2011 at 6:34 pm

    I’m just waiting for the day when the broking firm that I’m attached to informs me that I can longer give advice…..36 years in the City, a 6th generation broker…smoked ouit by the fascist FSA pro-RDR element who think that they have a god given right to dictate claptrap doctrine to all and sundry. The placard for my 1 man crusade outside North Collonade is being prepared now. How dare any regulator behave like this? Anyone care to join me?

  27. Ashamed to be British 12th October 2011 at 10:00 am

    Mel is correct
    It is never too late to learn. The truth will begin to dawn about 14 months from now, when the proverbial begins to hit the fan and the RDR is shown up for the total claptrap it has always been.
    Anon @ 12.37 has the right idea, if you are keen to achieve level 6 use it to do something else.
    Richard@6.34pm,I am sure there are many who will be willing to join you. Not that it will do any good. The stasi have decided our fate and no amount of protest will stop them because they are a state within a state, operating their own agenda, with no accountability.
    Welcome to British democracy.

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