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FSA: Why can’t advisers carry on giving free advice?

The FSA says it does not understand why firms cannot offer clients free simple advice services after the RDR.

Speaking at a Personal Finance Society RDR seminar in London last week, FSA head of investment intermediaries Linda Woodall (pictured) said: “Some advisers have told us they currently offer free services to clients with simpler needs but they will not be able to do this going forward. I would ask, why not? If they have been able to maintain a profit now without charging, why would that necessarily be any different in an RDR world?”

The FSA published a guidance consultation on simplified advice last month. It outlined that personal recommendations to buy a retail investment product through a simplified advice process would have to be paid for through adviser-charging, with advisers qualified to QCF level four.

When questioned by Money Marketing on how free simplified advice sits with promoting the value of advice and how advisers could offer this profitably, given that qualifications and liabilities are the same as full advice, Woodall said: “What I would suggest is that there would be a degree of cross-subsidy in particular businesses currently offering simplified advice for free.

“The level of services and the degree of cross-subsidisation is a matter for firms to decide in accordance with the design of their business model.”

Plan Money director Peter Chadborn says: “I know there is nothing stopping us from offering free advice but I was under the impression the one thing we could not do was cross-subsidise. What the FSA is saying seems to be a bit contradictory.”

An FSA spokesman declined to comment.


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There are 87 comments at the moment, we would love to hear your opinion too.

  1. Arghhhhhhhhhhhh !!**%$*@?*%@%”*??

  2. Possibly because post RDR IFAs that previously gave free advice are instead going to have to spend that time on providing a service to clients who pay them that trail which could otherwise be switched off! In many cases, free advice was in effect paid for by trail which could not really be justified and certainly was not earned.

  3. And the PFS members could not enlighten her either?????

  4. Advisers already offer “Free Advice” through the MAS and no doubt will continue to do so after RDR.
    The FSA cannot expect us to do more & more for less & less. They keep telling us that they need more & more each year so why should they think we are any different. What planet do these people live on.
    Oh thats right its the planet where you only use other peoples money so you have no real idea of the value of anything.

  5. Perhaps the FSA could offer free regulation!!

  6. susan the finance 20th October 2011 at 12:38 pm

    The reason we will have to cut back on pro-bono work is becasue we need to justify our trail income so spending the appropriate time on those clients with no cross-subsidy AND continue to pay non essential salaries such as Linda’s and the FSA/PFS e.t.c ……..

  7. Surely cross subsidy is a TCF issue??

  8. Let’s give the FSA a clue – do Boot’s provide free sandwiches to customers? does the local bus company provide free fares to passengers on a Friday? Free drinks during happy hour in the pub instead of 2 for 1? – has the penny started to drop yet Mr FSA?

    You want Adviser’s operating like Solicitors/Accountants and when they do the majority of consumers will be priced out.

  9. Having been at that seminar, i have to say that there was a lot of double standards, U turns, no clear understanding of the impact of RDR, AND THAT WAS ALL FROM THE FSA! What chance do we have!

  10. Is the full impact of the effects of RDR just beginning to dawn on the fsa ?

  11. Surely the FSA have been saying for ages now that cross-subsidy is not appropriate under TCF rules. It is their interpretation of TCF that made free advice impossible. RDR just makes “paid-for” advice for low net worth clients less attainable as well. The FSA representatives don’t seem to understand the implications of their own rules.

  12. There is no FREE advice it is work at the IFAs cost. When things go wrong its consult an IFA when its alright call for Free advice! The model does not work Find the client at IFAs cost First meeting at IFAs cost Discovery meeting at IFAs cost collect modest fee and pass to the providers!!!

  13. And we pay this woman’s salary!!
    Is there any hope?

  14. When I responded to all of the ‘consultations’ in the misguided hope that sensible minds would read and adjust I made the point that the existing commission/fee system enabled me to offer a pro bono service for certain clients because of cross-subsidies.

    Various FSA papers criticised cross-subsidies suggesting it was a venal and unfair system to work with.

    So if Linda Woodall now believes that it has a place she prssumably feels that commission also has a place, if used prudently.

    Can we now expect a u-turn from the FSA on this? Or this this yet another example of ‘we don’t know what we’re doing and we’re making it up as we go’?

    No bets please.

  15. Lets be realistic The FSA employ a bunch of idiots to say idiotic things. There is no such thing as a free lunch or so the FSA/RDR will have us believe. These comments from the FSA come from individuals who have no idea how the financial world works. They will be telling us next that banks/building societies give free advice but make an administration charge to cover the work

  16. This woman deserves her own Monty Python sketch!

  17. J K Rowling couldn’t make all this up !!!!!

    Its like the ‘Kings New Clothes’ – wake up and see RDR and all the rest of this pointless regulation for what it actually is !!!

  18. I thought you were not meant to cross subsidise under RDR. So, if you offer something free or at reduced cost, you have to offer it for everyone.

    Will “free” advice be free of liability as well?

    “An FSA spokesman declined to comment”…. probably as they dont understand their own rules either.

  19. Linda Woodall is proberbly suffering from brain washing by the none political charity Common Purpose (look it up) where she did a course in 2007, cost to us??? around £5000 for 2 days. Linda dont talk to me about free anything, as nothing is free thanks to people like you wasting our money! the sooner the FSA is gone the better.

  20. Have I just entered the Twilight Zone?

  21. Those that can, do. Those that can’t, teach.

    The FSA is sleepwalking (again!) into another crisis. This time, it’s one of its own making.

  22. I dont do charity work

  23. Does free advice mean that you still carry the liability for the rest of your life.

    Under the current rules and under the rules going forward I see no reason for giving free advice as you never know when it is going to come back and bite you on the bum.

    It also undervalues the service that we provide.

  24. Is Treating Customers Fairly going out the window now then? Give free advice to some customers, and charge others? Surely thats against the whole ethos of what they have been preaching to us.

  25. Surely the answer in simple, regardless of TCF/RDR and any other issue.

    The day Linda Woodall does her job for nothing (i.e I have no regulatory fees to pay because she doesn’t need paying !!) and I can get my basic needs accomodated by some form of barter system then I will not be work for nothing.

    Regard less of RDR/TCF or any other regulatory issues you can’t live in a world without money and therefore I can’t work and give advice for nothing.

    All of my clients get an initial appointment at no charge – in that why they all get something at my cost. In that way anyone who crosses the threshold gets something at A COST TO ME!!!

    Nothing in life is free and something that is (like advice from a bank!) normally has a catch or a sting in the tail of some sort!

    Was there are free bar at this event or is she just in the land of la la like the rest of the civil service??

  26. Peter Davies @ Create Wealth 20th October 2011 at 1:59 pm

    Guys, IFAs that have given free advice or done certain things for nothing haven’t helped themselves or their peers. Its certainly made it more difficult for the majority to exaplain the concept of fees rather than commission. The fact is we shouldn’t do anything for nothing and the sooner IFAs wake up to this the better for everyone. Fees need to be transparent and fair. Bring on RDR and the end of commission.

  27. Typical FSA comment, no idea about what goes on in the real world. Free advice, well not really free as the client saw the adviser. Discussed circumstances and bought the recommended product, for which the adviser received a fee from the provider. Lets take the later part out of the equation, what do we now have a charity! How does this misguided individual think that IFAs make a living. Just as well he can turn up at the office most days and not worry about how to generate income, simply waits to received his grossly inflated monthly salary. no worries at all, he can just make it more difficult for other people to make a living.

  28. I will start to give free advice, when my lender pays my mortgage for me, Tesco give me free food, Power companies give me free heat and light, the council does not charge me council tax and the travel agents give me free holidays !! Until then I will have continue living in the real World !!

  29. Peter, you miss the point. This woman wants to know what difference the RDR will make.

  30. This thread will run for weeks.

    There are many things about the FSA that concern me. One is the lack of accountability. When have we ever heard the FSA say, “Sorry, we got that wrong.”

    When have we ever had a public censure of anyone at the FSA from one of their directors or their governing board? “We regret that Linda Woodall portrayed her lack of understanding of the implications of TCF and RDR and ignorance of the content and reservations expressed in many of the consultations we recieved. Ms Woodall has been reprimanded and order to undertake further trainning todemonstrate that she is fit and competent to represent the FSA in future presentations.”

    Or better still, “The Chirman of the FSA has been fined £30,000 on for failing to ensure proper systems and controls were in place to ensure senior staff were trained on the implication of major legislative changes. After considering the previous track record of Mr Sants and his oversight of the banking secotr in 2008 and ongoing systmeic failures in regulatory oversight it was determined that he is no longer a fit and proper person to hold a positioni of significant influence in the financial services industry.”

    The TSC can’t hold these guys to account. Just who can?

  31. Before she next opens her mouth on this subject can Ms Woodall please phone a selection of accountants or solicitors in any Yellow pages and ask the simple question “Will you please complete my Tax return/ write my Will, and do it for free?”.
    Everything that the FSA has done has driven IFAs to this point and to now have the temerity to say that they should now do things for ” free” is a gross insult.
    You sometimes question “how low can they go”…and without fail they find a new depth.

  32. I don’t bother to attend PFS meetings. Reason? See above!


  33. Is it just me or is this whole thing becoming hilarious?

    Once I accepted the fact that we may all be living on borrowed time ( and started developing other lines of income) the news updates from MM are for the most part like a never ending soap opera. I recently attended an FSA RDR workshop where they did their level best to be helpful when asked questions, but we all knew that the Kafkaesque explanations of the definition of independent and restricted will never be understood by anyone any time soon. And now we may have a small number of ‘advisers’ struggling to charge fees with 20% VAT on top while everyone else fires up the old commission merry-go-round again. It could all get quite wild….I’m sticking to the original RDR model however, I can’t handle another review of the business model just yet.

  34. FREEEEEEEEEEEBIES!!!!!!!!!!!!!
    I want my free lunch too.
    What a load of Bullcr@p.
    I wonder if this woman will work at the FSA for free?

  35. I don’t beleive it!

  36. S Caunt distils the issue perfectly.
    I (like many advisers, I suspect) can hold my hands up and say I have received trail commission for doing nothing and that was, at least in part, how my ‘free advice’ was funded. So, when the regulators ask did you do anything for this trail? the answer is no but I was able to do something BECAUSE of it.

  37. Its a disgrace that this individual is actually in the position she is and that she is paid for by us, which I am guessing will be six figures. She should resign immediately out of respect for the IFA community.

  38. The base salary is £200,000 upwards and their bonuses up to 30% on top

  39. is a bonus the same as commission Alan?

  40. Outrageous ! Who else gives free lunches ?
    Is this what getting huge salaries does to people ?

  41. Do these guys have competitions to see who can come out with the most ridiculous statements ?!

  42. Thanks Alan,
    I Thought so!

  43. Maybe because if they did that it would not be treating customers fairly!!!

  44. Can only endorse majority of views.

    Mrs Woodall’s comment could have come from The Wizard of Oz; The Mad Hatter or Monty Python.
    But then they may have had more free lunches?

  45. What is the matter with these cretins?

  46. “If they have been able to maintain a profit now without charging, why would that necessarily be any different in an RDR world?”

    Er, thatll be because RDR CHANGES THINGS – your rules, your changes, your consequences.

    It was always inevitable that consumer control over remuneration (no problem) would mean that IFAs had to price every part of what they do as competitively and fairly as possible – and that simply leaves no room for “free” work. Its staggering that they never foresaw this consequence in the first place, let alone still cant see it even now. You can only offer “free” work if youre overcharging somewhere else. Perhaps she would now be kind enough to complete her insightful analysis by explaining which clients and which areas of advice she is happy for us to “overcharge” and by how much. I shall wait patiently…….

  47. Could someone please explain…..If cross-subsidy is so wrong and immoral why do we have a tax system that thumps a large chunk of the population with 40% and 50% tax?

  48. For the first time in 30 years of involvement in this business I’m actually scared. I’m scared because I see no end to the nonsense coming from our regulator, I’m scared because some of the companies we’ve submitted business to in the past have decided to marginalise us with their direct deals and service to intermediaries that is nothing short of appalling and I’m scared because it appears the lunatics are definitely running the asylum. Of course we’ve given advice to clients for free but in reality at our cost and in many cases’ our prospective clients think we’re a free advisory service and can’t seem to understand we work for money just like them. Now we have someone in the FSA asking why it can’t just go on as before after RDR. I mean really.

  49. The woman’s an idiot and clearly has no idea what advising clients is all about.

  50. What qualifications do you need to get one of these ‘high-powered’ jobs with the FSA. Do you, in your CV, put something like “I’m a total twat with no connection with reality, no useful past experience and ugly to boot – give us a job”.

  51. I’m tempted to reply “To make a living so that eejits like you can continue to make our lives a misery”, but I won’t.

  52. “Linda joined FSA in 2001, following completion of an MBA. Her career up to that date had comprised leadership and management roles within a variety of sectors, including Manufacture, Logistics, Healthcare and Accountancy”
    Which is why she has no clue about small firms needing to “work their butts off to earn money to stay afloat.

  53. James Tw . his comments

    I agree / just like you after 30+ years in this
    business / I also for the first time find myself very scared of what these regulators might be capable of !

    They continue to make mistake after mistake without any apologies whatsoever for their historic errors ………..

    Financial advice for free………..
    No no no no no no no no …………yes !!
    but providing we receive our corn at sometime !!!

    Any professional exerianced IFA / in their service
    to the public will have historically given free advice on inumerous matters / not always finance related. I always called this
    ( still do } ” added value ” thats real TCF .

    We should have collectively stood up to all this
    ” CXXX ” long before this got really out of hand as it now appears to have .

    We are now expected to become Monkees receiving peanuts / whilst our Mr Sants & FSA colleagues continue being Gorilla
    ” Bully Boys & girls ” receiving increasing sized coconuts.. Untill they move on to another jungle to destroy !

    Why cannot this industry be run by people who know what its about in the real world ?

    God help us all. !

  54. So Woodall is saying that we should charge paying clients extra so that we can give free advice to people who can’t afford our services. Do we actually write this in our service proposition?

  55. If my fees are going to be squeezed by RDR I can no longer subsidise free advice.
    Linda Woodall seems to be totally out of touch with reality.
    But that is what we have come to expect from the FSA.

  56. I am Exasperated.

    Or is it vexed?

    Having read it a few times today and seen what others have said all I can say is that I don’t know what to say about this if it has been reported correctly.

    Dear FSA

    What is this RDR all about?

    No eye deer

  57. FSA head of investment intermediaries Linda Woodall demonstrates a total lack of understanding of the IFA market . She could never have run an IFA business, or any business come to that.

    If the position after RDR needs it to be explained, she should just resign. Without the flexibility of trail commission, most smaller clients will not receive advice, as they will not pay upfront fees. Does Linda work for the FSA for nothing ? Get into the real world.

  58. 🙂 Ha, Ha, Ha, Ha, Ha, where’s my straightjacket? 🙂

  59. The FSA has become so prescriptive in its ways that its behaviour is reminiscent of an Oriental social experiment where an elite, headed by a despot, changes society utterly to match their vision of a perfect human society.

    The consequences have thus far been dire for such engineered societies, and so they will be for the Financial Services Industry and for the public interest following the implementation of the FSA’s “great” and rather blurred vision . It is already too late and the sensible entrepreneurs amongst our number will already have been planning their exit strategies.

    The comments in this stream have made interesting reading and sing out the growing tide of anger and frustration with The “Great Regulator”, but The Great Regulator isn’t interested, so determined is he to achieve his perfect model. Lobbying and appeals for common sense, by those amongst us who have worked hard to make a difference, have failed.

    We are screwed; some of us just don’t know it yet.

  60. In the good old days IFAs, and indeed back in my Dunbar days tied advisers, took the commission on offer. It allowed us to advise anyone on the basis that someone eventually would buy something on which we would be paid a disproportionate amount of commission. This cross subsidised our advice. In later years, standard 3% plus 0.5% trial was typical and again an element of cross subsidy was possible. Now post RDR not only will we have to justify the trail for that client but also the upfront fee for the initial advice. 3% across the board will simply not work. If Linda Woodall understood our background, history and the market she would never have made such a remark.
    If such a stupid comment was made by an adviser on a field observation visit he would have been roasted. Clearly there is a complete lack of confidence in this woman and her ability. Frightening. I for one would vote in favour of a no-confidence motion in her capability.
    Again I ask, why didn’t the group she spoke to enlighten her? Shame on you, since a very good point could have been rammed home. I certainly would have.
    Incidentally, TCF is not about charging people the same. The FSA has repeatedly stated this. They have no wish to interfere in what has been between the adviser and a client, only that it is clearly explained to them not only in terms of the initial advice but on-going advice and services.
    Talking about services, the FSA promised guidance for firms wishing to move over to adviser charging before 2013. They have reneged on that promise. I am glad we don’t promise our clients services we do not deliver.

  61. I like it Sam, if we can’t change the FSA and nor can the TSC, perhaps MMO can hep democracy by aving us vote publicly as to which FSA staff should stay and which should GO.
    I don’t want them all to go as we need a regulator, but some of them are plain out of their minds.
    If we get enough numbers voting, we can prove who IFAs think are the worst.
    Let’s take back our democracy from these quangos and embarass them in to resignation (where appropriate).
    I thought about posting anon, but why?

  62. They (Kenmir et al) listened to the PFS, that is why you face what lies ahead.

  63. The answer to the question Why can’t advisers carry on giving free advice? is very simple. We can’t afford to, primarily because the costs of staying in business (not least our mutli-tiered regulatory levies and the cost of our PI insurance) continue to rise exponentially every year.

    As many other posters have written, the FSA is totally out of touch with the realities of commerce, as demonstrated by the fact that it can’t even manage its own colossal budget with any degree of prudence. £14m overdrawn with the banks to pay £21m of bonuses a couple of years back? Never mind, just add it to next year’s levy bill and anyone who objects can either pay up or pack up. It’s all wrong. Yet Hector Sants denied before the TSC that the FSA has any sort of prejudicial agenda against the IFA sector. The facts suggest otherwise.

  64. “An FSA spokesman declined to comment.” kind of sums it up really.

  65. If Advice is free, will we still have life time and beyond, liability, or is Ms Woodall willing to cross subsidise her remuneration to help us out?

  66. The principles of the FSA are faultless and are a must for regulation .
    However they are like a political party , living in another World and full of people on the gravy train .

  67. For a contract to exist there should be offer and acceptance.
    With free advice, where is the contract?

  68. When will we hear an apology from the FSA on this one. It is an absolute disgrace that even one person from this institution (who is funded by government and IFAs) has this opinion.
    This woman should be repremanded and made to apologise to the IFA community, who she has so deeply offended!
    This just proves how out of touch and arrogant the FSA really are, which is a dangerous combination

  69. I will give free advice when the FSA give me free regulation, my PI Insurers give me free insurance, Sainsburys give me free shopping etc etc etc

    how about the FSCS? is that free?

    Surely the FSA could cross subsidy my FSA fees with those of one of the networks?

    Are there any jobs going at one of these regulators? seems like a right royal laugh to me!!!

  70. anyone fancy cross-subsidising my mortgage. i’ve got a rubbish 95% ltv rate. anyone fancy letting me push some of my mortgage onto your property to reduce my loan to value a bit.

  71. Perhaps they should have researched properly what they were doing in the first place !!!!

    How incompetant can you get!! THe FSA beats anything I have come across apart from a few lenders and yet they are still entrusted with ruining(running) Financial Services in the UK

  72. Unsuitable or offensive ? !!!!!!!!!!

  73. What next??????????????only just over 12 months to go, no clarity yet on any point.
    Business planning??? Gap fill even hasn’t been sorted out, thanks PFS.
    Well, I will now have to ask the question to new prospective clients ‘Can you pay me by fee please?’ If the answer is ‘no’, then they will not even get a first factfinding appointment. So no more speculative meetings, if they can’t pay, then they will not receive my advice. No more pro bono for the less fortunate. I will save my time and spend it working with clients who can pay.
    Maybe it will do me a favour in the long run, but not good for the customer who just needs an initial meeting to point them in the right direction.

  74. would anyone like to organise a peaceful march to Canary Wharf?

  75. Yet another silly question from the misdirected FSA
    super workpool, best answered:

    HMRC determine that in order to register as a business, the objective must be pursuit of profit, if profit is not the motive, such organisations are registered as charities. Therefore free advice is only availabler in pursuit of profit.

    Local Councils recently stoped providing enviremental health services, so anybody seeking to irradicate fleas, must seek and pay for a private
    contractor, who business plan is to encourage profit.

    Their regulator does not seek to employ the highest qualified from the employment pool leading to the suggestion that the FSA might learn
    something from such organisations

  76. In respect of the comments on RDR.

    The FSA has no interest in the outcome, as shortly the name FSA will be cancelled and listed high on the list of the useless regulator.
    In reality all that has happened is a fresh coat of paint or letterheading, problems will ofcourse be the responsibility of the previous job and not answered.

    The new regime will spend members money as if it was out of fashion, totally ignoring the effect on investment return and at the same time pursue the distruction of the IFA market.

  77. Riduclous ! Who is paying for all the additional costs of RDR ? Training, qualifications, additional record keeping, licenses ? Ring any bells ? WE will have to justify trail commission, charge customers up front for time and work. And it is the FSA that have stated that the average consumer will be prepared to pay £70 per hour !!! Wake UP !!! The British public will have less choice as many advisers leave the industry. RDR is a disaster that will force the public who don’t know any better into the hands of the banks, for substandard advice. IF you want that do not insult the rest of the industry by allowing staff in banks to call themselves ‘advisers’ of any sort. They are sales people nothing more. The banks won’t be giving ‘free’ advice to anyone, just business as usual flogging products. And we have seen over recent years what that results in……Wake up, before it is too late. The public outcry is just starting. (Also why isn’t the FSA providing ‘free’ advice to anyone?)

  78. I suggest that next week, every one of us telephones the FSA and asks them for immediate clarification on this issue.
    Why let them screw-up and hide behind ‘no comment’
    Let’s badger them…daily if necessary until they realise that we’re all just about sick of bending over for these half-wits.

  79. if not Mars what planet do these people come from.
    I have sat here for a while thinking of what to say and words fail me.
    perhaps they should arrange a mad hatters tea party.

  80. I was the individual who posed the question to Ms Woodall as there appears to be a great deal of contradictory statements in this area. The response to my question by Ms Woodall was disappointing to say the least, as was the contribution from PFS. I disheartened by this one day seminar and left with the distinct impression that PFS were afraid to make any challenging statements to FSA. This was a perfect opportunity to speak up but PFS demonstrated weak leadership. I will be interested in there stance at their forthcomning annual conference. I agree partly with Graeme Fergusons comments but would include PFS in this statement.

  81. Makes a mockery of client segmentation, yet again more clueless drivle from the inept lot!!!

  82. Linda Woodall IS AN ASSFACE BABOON IGNORANT BRAINLESS FF and the second f is for face you can work out the first F on your own

  83. When someone offends me my usual reaction is to have a dig back… but I don’t feel I need to, with a head that square she will offend herself every time she walks past a reflective surface.

    The clarity issue really is quite strange though. If they want to implement rules then have a rule book. If they don’t want rules then they need to stop making off-the-cuff statements. Put it in some guidance notes and leave it at that.

    I can’t imagine a fine coming your way if you cross-subsidise, nor can i imagine one ever has. Just keep giving your advice. I just ask myself would i recommend this to my grandma.. if the answer is yes the likelihood it is good advice.

  84. If I was a client I wouldn’t be particularly impressed that I was being charged an additional premium to facilitate free advice for others. How is this TCF? I simply cannot believe this has come from the FSA !!!

  85. We can make a living from fees as opposed to commission but at a much lower level than before but under the new regime (fees only), every case has to pay for itself.

    Everyone who wants free advice, and there are many who do, expects that there is a cross subsidy from those clients who “earned” us large commissions in the past.

    This no longer applies.

    Why can’t the regulators accept this?

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