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FSA should look at IFAs and count its blessings

The curious thing about the RDR is the context of the industry as a whole. Forgive me for thinking with a partisan view but the last time I looked, there was still a massive demand for advice of all shapes and sizes for every man, woman and child in the country.

What there is not, however, is supply from overseas advisers who think they can do a better job for less money. So why is there a concerted effort to try to restrict advice to those who can afford it?

Say what you like about the “good old days” but there was a certain harmony about the obvious cross-subsidy of advice costs that went on. Fair or not, most people quite liked it. Why are the lives of countless advisers being made miserable when they are desperately needed to satisfy demand? And where does the Money Advice Service fit into all this?

It is tempting at times like this to write out 100 times: “Please leave us alone to get on with things, we will find our own place in the world without you trying to do it for us.” I will try to put it more eloquently. Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity. Is that any clearer?

The FSA and other policymakers need to step back and count their blessings and appreciate what they have.

They need to make lives simpler and easier for the people who generate billions in revenue for this country and maybe at last start to address the dramatic problem of the savings shortfall.

Exam burden is a further issue that is causing stress. I had to double-take a while ago when I read it was feared that up to a half of advisers would simply throw in the towel and retire come January 1, 2013. Is this completely necessary, do we think?

Even though Thameside is well placed on this front, the best way to have done this was to raise standards from the bottom up. It would have been slower, I grant you, but fairer.

All that is going to be achieved is a dearth of advisers and a further fall in savings and cover. Nothing has really been achieved, not least of all a raising of ethics and morals.

I can already hear the howls of protest from “RDR-ready” advisers but that is a bit like rich people asking us all to go green, do some charity work and give money to the poor. This is fine if you have lots of spare cash but for most, it is simply not practical.

Tom Kean is director of Thameside Wealth Management

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. I am sure that the FSA are motivated by the highest ideals but it cannot be right to remove the ability to earn a living from an individual. as a patrt of this many more will be disadvantaged due to lack of access to an IFA.
    I speak as someone who has passed the exams, gap-filled, charges fees and has funds under management so no axe to grind.

  2. Incompetent Regulators Award Team 14th March 2012 at 3:15 pm

    You wait and see, the majority will not survive once RDR is in place.

  3. I concur!
    Unfortunately the FSA are looking at IFAs through the eyes of bankers. They see what we do, the huge market share we have and judge us by their own standards (and I don’t mean high standards). They assume as we operate face to face like a cottage industry and are content with a modest living that we must either be stupid, incompetent, or “they’re doing something that we just can’t quite put our finger on.” but if it was us (read banker / FSA), it must be sort of dishonest and they must be lining their pockets with …….. ‘something’. We will try to close every loophole we would use – (read banker / FSA again) and like the WWII SS eradicate them if necessary in an ‘IFA Holocaust.’ You might think this a bit strong but first it was commission bias and now they are worries about fee bias. There really doesn’t seem to be a way for us to earn a living by giving advice. If we don’t give it, who does? The banks – history shows they miss sell and give themselves large bonuses!!!!!

  4. The answer to the question posed in your second paragraph is quite simply that those that run the FSA are completey bonkers…

  5. Tom Kean, well put, I have asked senior FSA staff so many times, why the UK IFA is under so much presure to change when the model is not broken, it is what the majority of clients want and I personally have used the model for nearly 38 years now.
    All RDR is about is putting the older experienced IFA out of work alnog with their staff, but more importantly taking advice away from people (Clients and their families) who have in many cases become good friends for many decades.
    WHY??? the FSA, CII, IAFA, PFS, CISI and Mark Hoban cannot give a reason, the FOS statistics at less than 1% of complaints found against IFA’s (despite) not having an apeals process.
    So is there a ahidden Agenda…. yes to put us out of business, about time the majority of clever people who want RDR work up to the truth and put up a fight against none accountable overpaid people who are destroying public faith in the advisory service we offer. (at times for free because many members of society cannot afford it).
    A4E are employing none qualified peopl to do that for what reason??? but we are paying for it whilst nepitism rules the waves .

  6. I agree with all you say Tom. It would be nice to think the FSA might listen ………….. but alas you know as well as all IFA’s do, that we’re simply banging our head’s against a brick wall !

  7. “[The FSA] need to … maybe at last start to address the dramatic problem of the savings shortfall.”

    How is this different from any of the nanny state / social engineering issues that most posters here moan about with tedious regularity?

  8. Tom
    I am one of those RDR ready but you will not hear me disagree with you.

    We are already having a rather shocked/negative reaction from the less well off clients on our fees but we like others have to be realistic and protect our business. I really would not like to predict where this is going to end but either way savings overall will fall for those who need it most I fear.

  9. Clients invested good luck keep your fingers crossed! NPI, Equitable, London Life, Commercial Union, GA, Friends Provident, Clearical Medical,GRE,Sun Alliance, Sun Life,AXA,Scottish Amicable,Scottish Widows could go on the FSA let this happen… the clients will loose out…………………..now after RDR …………..who is going to look after the poor,middle class,clients children and also new job starters…..??? yes the Banks with their ever increasing unresolved client complaints up 78%…. well done FSA ! who is reviewing you?

  10. Life companies and banks have kept very quiet about RDR and with good reason. They can see the golden pre-1995 hard disclosure days coming back again.

    Whilst you cannot pay commission you do not HAVE to charge fees. You can build products that cover your costs and make a nice profit and then altruistically offer a ‘free’ financial advice services from salaried (probably targeted) staff.

    Consumer detriment? Just wait and see…

  11. Terence P.O'Halloran 14th March 2012 at 5:25 pm

    @ Tim Harvey. Magna Carta is quite specific about authority’s power to deny a person their livelihood.

    If we, Independent Financial Advisers, had been solicitors, accountants, doctors, any other professional group; RDR and the removal of an experienced person’s right to work would not have been tolerated.

    The mainly ‘trumped up’ reasons and overarching ease with which this has been brought about is no accident, it is vested interest and dogma of the most sinister nature; just what Magna Carta was assigned to avoid.

  12. I give up! Those in govt say they want the economy kick started, people & businesses to be optimistic. Govt needs the property market to come back and people to invest and what do they do? They let the FSA kill of IFAs who could do this and let the FSA depress the nation by stifling innovation. Conservative, Labour, Liberals etc. will not get this country back on its feet with the FSA / FCA able to ‘run the financial services’, of this country without accountability and uncontrollability. As government shirks its responsibility in this, we will not prosper and they are setting us up for a massive third world like future.

  13. “So why is there a concerted effort to try to restrict advice to those who can afford it?”

    Bravo sir, bravo.

  14. Very eloquently worded article from someone who clearly is time-served and understands the real aspects of our day to day journeys.

    Tom, like many of us, is fit for purpose in an industry which over-elaborates its true purpose and is filled with people whom are clearly not fit for purpose, all of whom feed parasitically from the table of the adviser.

  15. Good article Tom thank you. I thank my lucky stars that I always focused on HNW clients who can and will pay full professional fee rates. My colleagues elsewhere in the industry do an equally good and important job and face Armageddon. However, the rest of us, fee based or otherwise bill probably be wiped out by escalating levies and Euro regulation in due course. The industry as we know it will vanish I think over the next five to ten years.

  16. A very balanced article Tom but the sad result of RDR, as we’ve seen in Australia, is that it pushes the possibility of giving financial advice further and further away from the people who really need it. The cost of compliance becomes such that unless the client has at least around £150K you simply won’t be able to profitibly service their business.

    Those with a smaller nest egg and nearing retirement age will have to go to a bank or institution and will receive a standard template and pray that social services will make up the difference. However, the really frightening thing, as outlined in the FT Weekend, is that our children are the first generation that will generate less wealth than us baby boomers. Who’s going to help them?

  17. RDR- Old arguements over and over again.

    It is going to happen, end of 2012, if you are not already ready and have your SPS sorted, you will be out of a job.

    Simples!

    Whether that is right or wrong that is what is going to happen and a large number of older IFAs will simply off load their practices for either a cash sum or a share of renewals and walk away from what is the most ill conceived and badly researched change to our industry.

    Interestingly enough, I had a negotiation with a client on fees vs commission and our normal initial commission / fee for investments was 4.5% as expressed in the Cient Agreement. The clients faces went very pale, after they worked out what that would cost them from their fund.
    I chose to sacrifice this down to 1.5% with 0.5% trail on a drawdown plan.

    Having already put 13.5 hrs into planning and setting up the scheme, it works out that of the £1039 initial (less 67% for network) I retain £696 for my practice. Divide by 13 and hey presto I have been paid before tax and expenses an hourly rate of £53.50.

    Ok – pretty poor one might say. But consider this, the minimum wage is just under £7 per hour.

    Notwithstanding that I have been an IFA for 22 yrs now

    If anyone coming into our industry now, starting off as a fee based IFA, getting £53.50 per hour in your hand for say a 35 hr week would work out at a monthly rate of £8114 approximaely.(£97370 pa) would seem OK.

    After tax and NI net pay around £73K before expenses

    So three schemes per week and I should be sitting pretty.

    I WISH !!

    The biggest obstacle to our success is not having enough clients to work with who can afford us.

    Life is going to get a bit harder from now on, but I ask all those thinking of quitting, what is the alternative ?

    Let us count our blessings, enjoy or health and I for one will be try to enjoy what I do more, without the artificially criticised stigma about commission and will charge higher fees in future to pay for all this RDR rubbish.

    Just be thankful Sants is leaving.

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