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Bankers say it’s not too late to change the RDR

Knight: ’Issue which needs further discussion is siplified advice’

The Parliamentary debate on the RDR has not come too late to change the outcome of the review, according to British Bankers’ Association chief executive Angela Knight.

Conservative MPs Harriett Baldwin and Mark Garnier secured a House of Commons debate about the impact of the RDR on financial advisers, which was held this week.

Last week, Association of British Insurers acting director of life and savings Helen White said the debate was a “desperate last attempt” by IFAs to fight the reforms, which had “no chance” of succeeding.

In an interview with Money Marketing, Knight says the RDR has not yet been made law and some issues still need to be discussed. She says she has concerns that the advice gap will widen.

She says: “I do not see why the Parliamentary debate is too late, I think sometimes these things need to be properly ventilated. The RDR is not law. We are worried that the RDR will cause the market to shift and the choice will be between taking expensive advice or not taking advice at all.”

Knight sees simplified advice as key to servicing the mass market.

She says: “The issue which needs further discussion is how one develops simplified advice. It seems to have got itself marginalised in regulatory thinking and that needs to come back to the fore.”

The FSA’s RDR rules say the regulator will not look to create a new regulatory regime for simplified advice because of a lack of consensus in the industry about how it would operate.

It is asking firms to come forward with proposals and the BBA’s submission suggests it should be process-led.

It says: “The service would be predicated on models which generate personal recommendations based on a limited assessment of a customer’s financial circumstances.”

Knight says: “It needs to be absolutely clear that simplified advice is limited to a certain type of product or product suite. It has to follow a proper process, people have got to be trained, but not to level four necessarily, and the process has to be agreed with not just the Financial Ombudsman Service but also the regulator.”

Knight says the moving regulatory jigsaw is one of the biggest problems facing banks, along with rebuilding trust in the sector and playing a part in the recovery by supporting businesses and lending responsibly. She says: “The UK is altering its regulatory environment, the EU is altering its regulatory environment, Basel’s got a view on specific issues and the G20 is looking for international standard setters. This is a very mobile and moveable feast.”

She believes the G20 is the right vehicle for agreeing international regulation but the UK would be “foolish” to think that all the issues discussed are of equal importance to all countries.

She says: “International stability is of vital importance to all countries. A completely level playing field in terms of regulation is probably an impossibility but can we get a more level playing field? Yes.”

Knight says even with a more level playing field, there will still be a gravitation of business to the high-growth East but she stresses the importance of maintaining the UK’s appeal as a financial centre.

She says: “This means good and fair regulation, fair taxation and fairer employment policies but the UK does see things in a tougher light to a number of other countries so we will just have to wait and see what happens.”


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. I think this link from helps to explain the RDR issues well from an IFA perspective.

  2. I agree it is not to late.

    It must be halted and one of the areas, keeping to her area of attention, is to quantify the average spend in financial services outside of indemnity commission.

    Once this figure is discovered and a figure for each income band to see how much the average figure is distorted by high earners.

    Then a service affordable within this price bracket should be deliverable, but that should include a whole of market/IFA option.

    Time and cost has not been factored in to the RDR, client protection unfortunately must be limited to a fraction of this cost.

    Consumers limit their insurance etc of themselves and their homes to their affordable budget, protection of consumers with financial services (Ie ombudsman, compensation, time – report writing risk warnings etc etc) must also fall within their budget too).

    If the whole country was being put off purchasing general insurance due to time and cost there would be an outcry, time and cost does not figure in regulatory control of our industry apart from a stakeholder obsession which has actually pushed up costs during the FSA’s reign, funds were cheaper before they appeared.

  3. Not too late at all. The important thing though is not to make the FSA look as foolish as they are.

    A compromise might be to apply these changes ONLY to those who wish to use the words “Independent” and or “Adviser”

    Those who “sell” simply products and solutions ( up to 95% of the current market) could then choose to either comply with RDR or continue to provide service to their clients.

    The public could then choose to continue to deal with their adviser of the last 20 years or change to an RDR approved adviser.

    Choice – is not a dirty word

  4. Bianca Bartolomeo 3rd December 2010 at 9:31 am

    FAO John Blackmore
    “The public could then choose to continue to deal with their adviser of the last 20 years or change to an RDR approved adviser.” – i think you should have worded it as “to continue dealing with their sales man!”And I strongly disagree with you when you say that 95% of the current market are “sales person”. Me personally, I do not sell; never done, never will do. I ADVISE.

  5. @John Blackmore

    Spot on and exactly what we suggested to the FSA some two years ago. Your suggestion reflects exactly what the market needs a distinction between advice and product solutions. It is also a perfect solution to avoid what is feared might be an exodus of IFAs and the creation of an advice gap. It is a new and valid form of polarisation well done

  6. I would have thought this argument over advice and sales would have died by now. If a client comes to you and asks for advice, this is given, however unless you sell(persuade)your services that the client is prepared to pay for or a product which satisfies the clients needs as a result of your advice, you will not get paid. You can advise people all you like, but unlessyou sell your advice nothing happens.

  7. @ terry 9.48am

    That’s right some will pay for advice and others want advice bundled up with a product solution. The important thing is that the consumer should know which of the two they are getting and the price should be transparent.

    That’s why @John Blackmore is right in what he has said clients should be able to distinguish between the two offerings.

  8. terry, you are quite correct. Everybody sells themselves to everyone else all the time and if Bianca doesn’t do that she would not be making a living. I don’t know why so many people get on their high horse about this issue. I regard myself as more of an adviser than a selesman but that is only because I am a useless salesman. However, some people still seem to trust me so I do manage to sell myself, and my advice, to them regardless.

    Just because some people are good at sales it doesn’t mean they aren’t giving good advice as well.

  9. Angela Knight is right this time. Makes sense to have choice of how you buy these products and if it’s clear what you are getting for, say, £80 all in and what you are getting for, say, £150/hr, people can make an informed choice. Better that people get their needs fulfilled than stay out of the market, after all…

  10. Commission / Fees / Exams
    Commission / Fees / Exams
    Commission / Fees / Exams

    Cost to boil it down to these 3 issues £1.7Billion who pays – clients & IFAs

  11. Dear Angela

    In my ever so ‘umble opinion there is only one form of ‘advice’ and that is whole of market.

    Simplified, basic, wealth management… you name it and it isn’t whole of market is it? S so it must be selling a product or service. On? S upon a time you were either the agent of teh client or the agent of the life office/bank/DSF or whatever, you had to hand out an A4 sheet which explained the difference and you were expected to go through it with the customer, it was a ‘reason why not’ letter for the tied agents and LAUTRO had it kicked into the long grass.

  12. In 2007, as a young adviser, 20 years old with no financial services expierence i was thrown in front of customers selling investments only having past just CF1 and 2.. i was given 5 weeks of training on the advice process.. No support was available and was not allowed to look at protection for clients.. 3 years on, i have worked for 2 big banks, witnessed bad advice being given on a daily basis for targets only and ignoring what is right for the customer.. I have now done all the CFs and now passed IFS diploma, while starting first Advanced Dip exam in April.. I am now an IFA, and hand of heart believe what i have done to get to where i am is not acceptable.. The CF exams are not of a high standard and the diploma is what a client deserves in terms of knowledge.. If you have worked as an IFA for more than 3 years and have a good record.. That should be enough and grandfathering should be in place.. More regulation of Banks is a must, they sell one thing Structured Products and are not Protecting their clients.. New entrants a diploma is not a great ask and lifting the standards from 2012 onwards will be the right move come 2012 let alone 2015 or 20.. The older IFAs are getting the short straw here and forced to do exams that are worthless to them and a kick in the teeth.. Financial Advisers who want a long career in this, look around we have had it easy and start studying before you get left behind!

  13. Tom IFA. Bang on 1.7 billion……unbelievable anount of money to acheive 3 outomes.
    I can’t imagine how high RDR compliant firms fees will rise to, post RDR.

  14. I agree young man, I am 50 and have worked for 3 major Banks. Advice goes out the window to achieve targets.
    The really worrying thing is advisers do not sell protection because the banks are afraid of the consequences of meeting claims. S & I come lads there is a campaign next month nice bonus up for grabs, click the link to view maturities.
    Glad I got out when I did.

  15. So Helen White thinks that the RDR will “cause the market to shift”, HELLO HELEN !!! thats the whole point of the exercise or have’nt you twigged ? Its gonna shift the clients straight to the banks doors (the guys who caused it all in the first place) keep writing to your MP’s fella’s and good luck, honestly, I’m on your side but your playing with a loaded deck.

  16. @ Bianca – As I have no knowledge of how you run your business/practice I can but accept that you work at the advice end. If this is so then you are, indeed, one of a very, very small minority who give advice but do not sell.

    It may also be true that there is a confusion over what we both mean by “advice”. Using the weak form almost anything can be called advice. Using the strong form Advice might mean that any product involvement is prohibited.

    In practice most Adviser/Sales people give advice and sell product.

    In my case I do not call myself any adviser simply because I only deal with people who have sufficient wealth to invest in the products that I advise them to invest in.

    I would be just as happy to give advice and to write reports for a fee.

    My point in claiming that 95% are sales people might better be put by suggesting that for the 95% the sales aspect is dominant with advice is ancillary.

    Terry said that he thought that the argument over advice and sales was over. Perhaps that is part of the problem. The FSA are hell bent on calling “sales”, “advice” and requiring Q level 4 even where it is unnecessary.

    Stop and think. Even level 6 is only degree level. With verging on 50% of young people today getting a degree can anyone take level 4 seriously ? I would certainly not want to take complex advice from someone with only level 4.

    I would however be happy to be sold a packaged Stocks & Shares ISA from some one with only level 3.

    Anyway the point here is choice. why are the FSA and some IFAs so afraid of choice ? why do they want to force their religion on all ?

    Let the public decide.

    Finally – I accept your correction – change the word “adviser” to “Sales Person” – It is not the insult that I think you might intend.

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