Rewriting the RDR: Advice review eyes lower qualifications and return to commission

An influential panel of experts appointed by the Government as part of the Financial Advice Market Review is considering radical reforms to regulation which would roll back key aspects of the RDR to boost access to advice, Money Marketing understands.

The FAMR, jointly led by the Treasury and the FCA, is assessing barriers to the provision of financial advice following the pensions overhaul introduced last April. In particular, the review is looking to tackle the advice gap for people with smaller pots to invest.

As part of the FAMR, the Government appointed an independent panel to develop reform proposals. The panel’s recommendations will be hugely influential in shaping the outcome of the review.

Sources close to the panel say a number of radical ideas have been seriously discussed during the three sessions held in the second half of last year. These include creating a new basic tier of advice with a lower qualification requirement for simple accumulation products, developing a new charging structure similar to commission and banning regulated advisers from selling unregulated products.

So do policymakers have the appetite to pursue changes which potentially undermine the RDR just three years after it was implemented? Can they really think the unthinkable to boost the UK advice market? And will consumers be better or worse off as a result?

Back to the future

One idea on the table – which is currently in its early stages – would reduce the qualification requirement for advisers selling basic products such as Isas.

A source close to the panel says: “The panel are looking at an initial tier of financial advice. You are looking perhaps at an adviser who already has a mortgage licence and a protection licence, for example, and is on the way to getting QCF Level 4, is in the supervisory framework but is offering advice on accumulation products. So just Isas and simple pension products.

“It is supervised but there would be a lower level of regulatory risk because these are essentially products and advice that cannot go wrong. It could be a set of four or five questions instead of full suitability reports and a full factfind.”

Details of how consumer protection would work in such a regime have yet to be ironed out, however.

The source says: “This sword of Damocles hanging over some of the regulated firms is what puts them off giving any form of guidance or advice for people with smaller pots.

“There would still be consumer protection and we need to see exactly how that would work. These talks are at an early stage but there does need to be some differentiation.”

A separate source says allowing firms to receive commission on simple accumulation product sales is also under consideration.

The source says: “The panel have discussed putting forward an alternative commercial model for advice that would allow a fee to be built into the product. So today you might pay 1 per cent and it is normally paid by selling units in funds but it has to be agreed as part of your service agreement with the adviser. What is being discussed is more like commission.

“So you could invest in an Isa or a pension and the adviser receives a fee on completion of the transaction direct from the provider.”

Panel members have also discussed the possibility of banning regulated advisers from selling  unregulated products.

No agreement has been reached on taking these proposals to the Government.

However, the very fact they are being discussed suggests the FAMR could fundamentally redraw the advice landscape yet again.

Market expansion

Apfa has previously called for the regulator to create a lower liability “simplified advice” model to allow advisers to serve the mass market.

Apfa director general Chris Hannant agrees such a model would need to be restricted to basic products.

He says: “You have got to focus on a specific range that will almost always be suitable, like a basic stocks and shares Isa with a fairly conservative investment offering underpinning it. That wouldn’t be for many people already taking advice, but it would expand the market.”

However, independent pensions expert Alan Higham warns the market may not be safe enough to adopt this model.

He says: “The question is can you get the retirement savings product to a place where it is always suitable? I don’t think we are quite there yet but it is not impossible to conceive of. It’s like buying ibuprofen and paracetamol from the supermarket without seeing a chemist. Stuff can go wrong, but it is within the consumer’s ability to manage that.

“If we can get to the situation where we have retirement savings products that meet certain minimum standards, then I don’t see why they couldn’t be sold by advisers with less extreme qualification requirements.”

Retrograde step

Both Hannant and Higham are lukewarm in their response to a potential return for commission-like charging structures.

While Hannant does not oppose commission in principle, he says consumers must be clear they are not receiving free advice.

He says: “We need a level playing field in terms of transparency when it comes to how things are being paid for. One thing we are worried about is people not going to advisers because execution-only appears to be a free option. So what I wouldn’t want to see is something that drives people to opt for something that was less comprehensive because of the appearance of it being free.

“That could potentially distort the market away from proper advice, with people taking a dumbed-down version because they are put off by fees.”

Higham adds: “We have something like this already called adviser charging. Provided that a product fee was explicitly agreed to, then that is fine.

“But I would be worried if we went back to the bad old days where anybody could charge a commission and be less than clear about doing it. That would be a retrograde step.”

Last March, Aviva scrapped plans to offer a phone-based guidance service over fears it would accidentally stray into advice. Head of financial research John Lawson questions how the Government could administrate a system of reduced requirements to provide advice. He says: “We would welcome some softening of the guidance rule because it might mean some providers can also give a bit more help down the bottom end.

“That sort of thing makes sense if it is just savings, but how many people are going to be in that category, and where do you draw the line?

“Isas are a relatively straightforward conversations for many of those young people, so I can imagine why you might allow advisers to do that at a lower level, but when you reach retirement it gets quite complicated, so that will be a tough judgement to make.”

Nonetheless, it is a stance that will likely be backed by some providers. Responding jointly to the consultation, Old Mutual Wealth and Intrinsic called on the Government to introduce a new “foundation tier” of regulated advice, while Aegon also wants to be able to provide new levels of support between the current definitions of guidance and advice.

Aegon regulatory strategy director Steven Cameron says: “We hope the FAMR will introduce a new cost-effective model between full and ‘no’ advice which both advisers and providers may deliver.

“Public financial guidance also sits in that middle ground but if the private sector can deliver more here, the Government should consider reducing the scope of what the likes of MAS and Pension Wise offer.”

However, LV= warns policymakers against softening requirements for the provision of advice.

Money Marketing first revealed the provider would launch its own fully regulated online advice service last May, and life and pensions managing director Richard Rowney says: “The way of giving affordable advice to people is not to lower the standards.

“If you lower the standards for advice, it will be like going and getting your car serviced and not being able to guarantee that it’s going to have the brakes working.”

“We believe we can provide full, regulated advice for £200 so our viewpoint is we should get rid of any complexity around simplified and focused advice.

“We should be making it really simple so they are either getting information or guidance, or full regulated advice.”

Adviser views

Dennis Hall, managing director, Yellowtail Financial Planning

A lot of people have suggested maybe QCF Level 3 is adequate for a large proportion of the population, and I would not disagree with that. We have got to somehow make it simpler for people to offer, but if you are waiting for a lot of people to reach Level 4, you are probably going to be waiting a long time to get a big enough sales team out there to make the kind of difference we need.

Tim Page, director, Russell Page

The problems in the market are more fundamental than can be addressed with a new level for advice – we need to really reduce the cost of delivering advice to the customer. The cost of hiring a junior adviser might be less, but in the greater scheme of things, when you add up all the things associated with that, the gains would be too marginal to justify this kind of change, and it would just add more confusion into
the marketplace.

Timeline

3 August 2015

The Treasury and FCA unveil the Financial Advice Market Review, alongside a separate investigation of state-backed financial guidance.

12 October 2015

Consultation documents for the FAMR are published, revealing a focus on what kind of support consumers want access to, whether any advice gaps exist, how they can be closed, and what role technology such as robo-advice could play.

15 October 2015

The Treasury reveals the members of a 15-strong expert panel recruited to advise the Government and the FCA on the FAMR.

22 December 2015

The consultation on the review closes.

16 March 2016

The FAMR is due to produce final proposals for reform to the market ahead of this date, when Chancellor George Osborne will reveal his 2016 Budget.

Who is on the expert panel?

Chairman:

Scottish Widows chairman Nick Prettejohn

Panel members:

Aviva UK & Ireland life chief executive Andy Briggs

FCA Smaller Business Practitioner Panel member Robin Keyte

Financial Services Consumer Panel chair Sue Lewis

Defaqto wealth insight consultant Gill Cardy

Which? director of campaigns and communications Alex Neill

Old Mutual Wealth chief distribution officer Richard Freeman

Citizens Advice chief executive Gillian Guy

Nutmeg chief executive Nick Hungerford

Hargreaves Lansdown chief executive Ian Gorham

Barclays retail and business banking chief executive Ashok Vaswani

Nationwide retail director Chris Rhodes

Fidelity head of investment trusts Nicky McCabe

LV= managing director of life and pensions Richard Rowney

Age UK chief executive Tom Wright

Legal & General managing director of mature savings Jackie Noakes

Expert view

Predicting the future of regulation, particularly in the ever-changing financial services sector, has often seen pessimistic predictions and the likelihood of further impact and cost. However, following a more positive and progressive year for the advice profession, 2016 could see some overdue reform and evolution of regulation itself.

A significant catalyst in the metamorphosis from an industry to a profession was of course the RDR and by April we will know the initial findings of the Financial Advice Market Review, which are expected to be announced by the Chancellor in his Budget speech –although further consultation is likely prior to this.

The FCA’s senior team has acknowledged the need to adopt a different approach and there are indicators we will see the introduction of some much needed regulatory reforms to support that evolution and to create a more stable and sustainable landscape from which to increase access to regulated advice and services.

Undoubtedly the biggest single issue advisers want to see tackled is what many view as unfair and unsustainable regulatory costs. Alternative funding solutions must be found for the FSCS in particular, whether that be some form of product/investment levy or a pooled insurance principle to eliminate the unsuspecting and sometimes crippling additional costs. The FCA’s business plan for 2016 already looks full and it has a number of key consultations in progress. It will also need to consider EU policy and negotiate any amendments to ensure they are fit for the UK markets.

Including the potential significance of the FAMR, we are likely to see even more consultations introduced in 2016 as a result.

Fair, balanced and proportionate regulation does feel like it is on its way, but this will not be at the cost of watering down standards or appropriate consumer protections. Supply and regulation of financial services has to work well for consumers and both have an opportunity to evolve more collaboratively during the course of 2016.

Keith Richards is chief executive of the Personal Finance Society

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Comments

There are 51 comments at the moment, we would love to hear your opinion too.

  1. You are bl–dy kidding!!

    I would have hoped the review would have squared the circle and banned ALL commission (Life assurance, annuities etc). This at least would have been another step on the road top professionalism.

    What hope now that our industry (not yet, but aspiring to become a profession) is regarded in a better light?

    What next? Doctors (who are also in short supply) with nothing more than a first aid course. Bricklayers becoming architects perhaps? (We do need more houses!)

    What a bunch of Barclays Bankers. (Rhyming slang).

  2. “It is supervised but there would be a lower level of regulatory risk because these are essentially products and advice that cannot go wrong.” …. cannot go wrong?…. hilarious!

  3. Well there is ‘one’ adviser/practitioner on the ‘expert panel’ of 15! Oh and with the greatest of respect he is hardly the typical adviser (Chartered and Adviser of the Year – well done Robin by the way!) If you want to consider what the needs of those at the coal face are (both sides) best ask the guy who works in the lovely clean office up top!

  4. Dear Lord !! (which ever one you kneel before)

    What a load of crap

    All I want, is to be left alone to do a job and run a business, not squeezed for every penny they can get out of me, not blinded by a toxic fog of mindless regulation demands, not waste time and money by having to complete of fill out senseless forms like the RMAR’s

    The hurdles to the industry is not exams (although partly irrelevant) or separating advice criteria………… its (Bad) regulation and arbitrary costs !!

  5. Has commission really disappeared? Of course not – now 3% initial and 1% ongoing adviser and of course contingent sale. I think the term commission is more emotional rather than anything else. It is all about disclosing to the consumer what he is paying for advice and ensuring that the commission is capped not only in amount but also term.
    As I start to think about another GABRIEL return, I am more concerned about the reporting requirements for all this!

  6. I’m still here Guys but I’m wondering both how and why? So basically, they’re saying RDR was a crock of **** that really didn’t do anything other than drive good, possibly older advisers out of the industry and made it nearly impossible for lower net worth clients to receive proper financial advice. Yes, a success by any definition you want to use. In your dreams.

    • I agree with you James. Many of us warned them of this and just 3 years down the line they are talking about a reversal! At whose COST.
      Take away Lord Sants Knigthood please and then I’ll accept no rebate for the costs of RDR and it’s reversal otherwise they are just rewarded for their musical chairs.

  7. John Reilly is totally correct. The mak-up of the FAMR reflects the basic problem of the participents coming to the table with pre-conceived ideas and agenda’s. In the past many people were happy to depend upon an individual adviser, in whom they trusted and who were part of their community. These advisers are now extinguished by regulation, cost and the compensation culture. The industry is now in the hands of mega firms who become removed from the ‘man in the street’. Who on the FAMR has had recent experience of being out on a cold, wet, Tuesday night talking to a client in contrained finacial conditions, trying to square circles. All this to the background of a child who refuses to go to bed and a dog with a sore paw. Becoming professional does not mean following the failed mantra of the legal or accountancy profession, where involvement with them is seen as an occassional necessity and financial disaster. The prevuious arrangement of a compulsory declaration of the commission or fee option was fit for purpose, but was not sufficiently complicated to justify the regulators fees and careers.

    • Gill Cardy was advising up until a few years ago and I trust her judgment, however, it remains annoying that she and many others were not listened to sufficiently pre RDR (Gill was on the smaller business practitioners panel of the FSA whilst working as an IFA) and now they are looking to turn the wheel round only 3 years in to the RDR to nearer what they were told they should have done in the first place!!!
      It was Gill’s influence which helped me decide that remaining an IFA rather than going restricted didn’t need to be as big an issue as same Networks wanted to make their ARs think it was.

  8. I quite agree with Harry Katz.

    This will just mislead the general public further. Not only will you have to explain the difference between independent vs restricted advice but now you will have to explain that whilst a lower level of qualification excludes one from advising on certain products it shouldn’t affect the quality of the overall advice!!

    An ISA may well be a straight forward conversation in isolation but how does the less qualified advisor go about discounting other products to determine that an ISA is the best solution?

    As for the reintroduction of commission I can imagine the conversation between the Level 3 qualified restricted advisor and the client. Don’t worry about the fee Mr/Mrs/Ms Client the provider is paying for the advice!!

  9. It would give the high street banks another route in though….. I can just imagine a QCF level 3 Bank ‘advisor’ telling a customer that ISA’s ‘can’t go wrong’.

  10. Unfortunately most commentators, providers and regulators seem to completely miss the fundamental problems which underpin access to advice/information.

    1.) They mistakenly believe that nobody is responsible for their own actions and have utterly lost sight of the fact that the consumer is the only one ultimately responsible for their own actions.
    2.) They are under the mistaken belief that a client making a poor decision is somehow the advisers fault. Reality suggests that it’s only the adviser fault, if the adviser misled the client. Ironically this is the model used in virtually every other industry, but the reason that it seems it is not used in finance, is because “it’s too complicated”.
    3.) Despite finance being “too complicated” for the common person to understand, outside of certain areas (such as investment management) the perception of the regulator, the government, providers and in many cases the advisers themselves, is that “advice” isn’t worth much, so they either think that it should be “free” or that it should be cheap.
    4.) Much of the cost of “advice” is in all the i dotting, T crossing and paperwork completion that advisers have to do, it is this that is one of the primary reasons why the cost is so high, because it takes lots of time. How many patients would a GP be able to see, if they had to document the medical advice they gave to the same standard as a Financial adviser? What would lawyers and Barristers fee’s be if they had to do the same?
    5.) The vast majority of people are financially illiterate, yet many seem to think they are not, without basic financial understanding, most people are clueless as to how little they actually know.
    6.) Financial advisers and planners are guilty nigh on to a man/woman, of undermining their own value by being seen as “salesmen/women” of financial products, rather than actual advisers, who show what value THEY and their knowledge adds to their clients. To the advisers out there reading this, if you are truly honest with yourself, how many of you actually sell your clients your expertise and knowledge? From my extensive experience the vast majority sell pension, investment or protection policy.
    7.) Most of the large “scandals” to plague the industry over the last 30 years have been as a direct result of government policy. Yet always the industry is blamed and never seems to really fight back against the politicians who are frequently the ones truly to blame.
    8.) Lastly and possibly most importantly, policy is decided usually be people that know next to nothing about what they are doing, i.e politicians. They come up with some wonderful sounding policy (e.g George Osborne’s pension freedoms), and then expect us to somehow make a silk purse out of a sows ear, whilst the politicians take all the credit and when it goes wrong in the future we take all the blame? Lets face it, does anyone here honestly think that the pension freedoms will be overall good for the country in the long term in their current format? Or are they a good idea in principle for some and a disastrous idea for others/the country as a whole?

    There are solutions to these problems even without getting politicians to admit fault (which will never happen), but those will only occur when the following happen.

    1.) We start believing in the value that good planning/advice can bring to a client.
    2.) We stop calling supplying a client with a simple product, advice.
    3.) When the regulator stops thinking that a client saving or investing money they already have is much more risky than a client borrowing money they haven’t got.
    4.) When clients who make frankly stupid decisions are forced to face the consequences of their decisions, rather than have an apparently automatic right to compensation from their “adviser” if the adviser forgot to cross 1 T or dot 1 i.
    5.) When staff at the regulator and ombudsman are held to the same standards we are.

  11. WTF???

    So what were all those RDR qualifications and months of study about then?

    Most of the questions to gain level 4 were about very complex investment situations that none of us ever came across in real life and if we did we’d pass it to an expert in that field.

    Many people go to their GP’s with headaches but your GP isn’t expected to be an expert in brain surgery to give advice about taking paracetamol.

    Now they are talking about lower qualifications for ISA’s and simple pensions , the stuff most of s have been selling all our lives.

    How many millions ( if not billions) have been wasted by the FCA to find out what we had been telling them for years before RDR. They wouldn’t listen would they !

  12. This isn’t really about the quality of advice though is it? It’s about shifting product and making profit once again in the mass market, under the guise of closing the advice gap. If you view it from that perspective then it all makes good sense, which is all that will matter at the end do the day. The reality is that the current system and qualification requirement is a barrier not just to advice, but to institutional access to the market and the latter is the biggest number in the equation. Dress it up how you like, as I’ve said before, it’s coming (back). Does it impact me? Not really. Does it gall me? Well yes, as I have seemingly wasted much time, effort and money to get to where we presently are. So much for playing the game.

  13. I bet there are a few like me feeling very smug (very very sad too) about this truly hilarious about turn predicated by the ‘EXPERT’ panel.

    I’ll have a look at my and most other submissions (to TSC, FSA etc etc) PRIOR to RDR and I’ll think well there’s a thing every downside illustrated back then has come to pass. Those architects of this truly appalling bit of regulation (RDR) should be taken out and publicly ridiculed. THEY WERE WARNED.

    Now for MMR – watch this space !!!

    Hans Christian Andersen couldn’t write this

  14. I have said all along there is no problem with commission if there is a cap of say 3% that everyone, including St James Plaice, adhere to with an ongoing service charge that could then be variable with a cap( so it could be reduced as the FCA, FSCS FOS etc were no longer building their tower and reduced our charges accordingly). I can see no problem with level 3 advice as long as the adviser is working towards 4 in a set timeframe and is properly supervised. Most of the stuff you need to learn for level 4 is totally irrelevant and you never use again once the exam is passed and if you do need it you know where to find the answer.
    Anyone coming into the industry now though should be degree level so they know how to do research.

  15. “I’m wondering both how and why? So basically, they’re saying RDR was a crock of **** that really didn’t do anything other than drive good, possibly older advisers out of the industry and made it nearly impossible for lower net worth clients to receive proper financial advice.”

    Precisely so James, as many of us suggested at the time but were ignored. So three years or so down the line the message may well have got home. To call all this frustrating would be the understatement of all time – and what it says about the quality and perception of the regulators at the time is staggering.

  16. Douglas Baillie 7th January 2016 at 1:32 pm

    I have just seen a FOS adjudication that was held against the adviser for the following reason:

    “as the adviser’s agreed remuneration would come from the product purchased (a personal pension), the advice to be given was therefore biased right from the start in favour of making a product sale, and was therefore unsuitable”.

    Is FOS aware that probably >99% of all Customer Agreed Remuneration is paid this way, and that consumers will not pay fees up-front?

    • Wow what a bl@@dy shambles…

      I believe the regulator has over complicated the compliance function within our industry (RD classic example) which has allowed them to maintain an iron grip and feather their own nests, Wanabee greedy bankers in disguise…

      It has backfired and their are millions caught in the advice gap as a result of RDR, they have probably had their wrists slapped by the Treasury Dept and this is the resulting outcome.

  17. I agree with Harry Katz…to a point. However, when I considered his analogy about the Doctor, It made me think of the ‘fee vs commission’ issue and I couldn’t help think that most doctors are remunerated well (by most peoples standards) and are certainly regarded as professionals. That is without the need to ever levy a fee directly to the patient. It left me thinking that how we are paid doesn’t always determine how we are perceived by the public – professional or otherwise.

    • Hi Tom

      Ever heard of private practice for doctors? Not everyone uses the NHS and the private sector is thriving, notwithstanding the high charges. Why? Because they provide a far better service and a generally better qualified (no Juniors). We are not in a dissimilar position (or that was the idea). The financial services NHS were the banks and we were (are) the private practice consultants.

  18. Tim tim@pagerussell.co.uk 7th January 2016 at 1:48 pm

    It’ll be 10 years ago in September that Callum McCarthy kicked this all off at the Gleneagles conference. I’m not sure I have the energy to go through this all over again (and I’m only mid-40s)!

  19. Duncan Gafney’s comments hit the mark and @Harry Katz is way of kilter.

    The advice gaps are primarily amongst the non high net worth consumers and these are ones discommoded by the impact of the RDR. It is no surprise to anybody with a functioning brain that the gaps are now wider than pre-RDR. The RDR privations exacerbated them.

    Commission is not the problem. If commission is abused then it is up to the regulator to monitor it and make whatever enquiries it deems appropriate. In doing so it should then leave alone the vast majority of advisers who do a good job for their clients and providing them with whole of market advice.

    They say what goes around comes around and never has this been more true in financial services.

    • Unfortunately Alan, it is not the RDR architects who have paid for the RDR and nor will it be they who pay for any reversal. I think I’d rather have my vasectomy reversed than go through all this ***p again.
      I’ve just about got my trainee to level 4 in just over 2 years (he’s level 3 already), but if he only needs level 3 to do what I want him to do, which is regular contributions for people his own age group. mortgages and protection, then we can take the foot of the qualification speed pedal and focus on him covering his salary and costs rather than study!

    • Alan you never cease to amaze. I can never understand why someone with your expertise and talent (no flattery – fact) is so hell bent on fishing in shallow water.

  20. To pick up on Harry and Tom’s comments and the Dr/GP analogy, it was announced in the news today that GP’s are proposing to introduce a £10 flat fee for an appointment suggesting that they believe this will deter time wasters and reduce missed appointments, in other words if the public are faced with having to pay upfront for medical advice it will put them off seeking that advice and that’s only £10! In this instance of course it is intended to reduce the strains and burdens on a struggling NHS system…

    Surely the same human nature applies in our industry, certain sectors of the public would rather not seek and pay for ‘advice’ up front and out of their own pocket but would “seek” advice knowing the adviser is remunerated in some other way??

    Sadly I believe the whole reduced qualification to ‘sell’ isa’s thing is obviously aimed and allowing the banks to start selling again and earn commission again.

  21. Lower the qualification threshold. — Will this mean that they will compensate all who studied and attained the Dip qualification? — This will allow all the others who did not bother to sit the qualifications to re-enter the investment advice industry. Its a nonsense!!

    The FMAR Panel of experts– Its a joke — Not an IFA on the panel !! its all the investment companies who have had to put up with a fall in business when the RDR came into being, now want to open it up to the masses once again to increase their production.
    A return to commission !!! What was the RDR for? Who will explain all the millions spent on the RDR set up to the tax payer. Heads need to roll if this goes through .
    If this was China the culprits would disappear from the streets!!!

  22. thing is Harry there are lots and lots of fish in shallow waters for the talented and successful fisherman. Alan and (without blowing my own trumpet) I are extremely talented fishermen.

    You fish in your pond and I’ll fish in mine – that’s the whole point. Those who wish to charge fees and be ‘wealth’ managers are free to do so regardless of whether commission is available or not and regardless of RDR’s existance – free markets/clients decide and all that !.

    Oops , broken record been playing since the pre RDR submisssions !!!!

    One thing is for sure those experts have a lot to answer for with this little failed experiment. And seriously MMR will be next on the agenda you can put your house (if you own it) on it !!!

  23. Let’s get it right. Not every adviser advises in every area or on every product.

    I do not need to know about EIS and VCT if I deal in protection and personal pensions. My time would be better spent gaining even more expertise in these areas to my and my clients benefit.

    Should I take a HGV test to drive a Clio?

    The more in depth the advice (normally for HNW clients) the more expertise is needed to explore the mysteries of the tax rules and such. My own knowledge is quite sufficient in those areas where I choose to work. Complex or unsuitable areas are farmed out to other advisers who do have the expertise – common sense really.

    Once things were relatively simple – we had ‘independent’ and ‘tied’. Various well-meaning committee sitters determined that this was anti-competition and today we are stuck with this morass of confusion.

    A range of different level advisers working in different areas makes sense as long as the overarching hand of regulation does not destroy the theory with yet more red tape.

    • Good point re EIS & VCT, since RDR, I’ve considered & discussed EIS & VCTs with and for clients, but I don’t need many fingers to count how many I’ve done!

  24. Roman Duzinkewycz 7th January 2016 at 4:32 pm

    Agree with all comments but you are forgetting something – ‘they’ will do as they please, irrespective of what is said here, or anywhere else on Planet Earth for that matter – yet again, left hand this is right hand and who in their right mind believes any adviser actually makes any difference to what will happen? I also refer to Santander re-entering the advice market by the way – who will stop them?
    Dream on.

  25. As stated above there is only one actual Financial Adviser on the panel. Therefore I can only assume that these suggestions are being driven by mainly banks and some large insurance concerns, as the RDR has caused them the greatest issues.

    As for stating there is a reduced risk in simple products such as NISA, I would strongly disagree, if anything this is the area that needs the greatest regulation. This is the type of product where investment risk, failing to understand by those least able to comprehend the potential losses will produce the greatest claims.

    I do agree with removing the unregulated investments from regulated advice. However I would suggest an additional subclass is created to identify those advisers undertaking this high risk business and make them accountable for their own FSCS failings. Also that certain unregulated products be regulated or a regulated offering provided.

    The advisers warned the regulator of the problems RDR would bring. I find it insulting having now effectively realized their goal of a commission free Professional Advise offering, they seek to undo all they have achieved, having been warned before hand. How many billions have been wasted?

    The current qualified advisers I am sure would not wish to return to pre RDR working practices. Having undergone the pain and hard work to achieve what effectively was demanded of us, this would be both unfair, a clear admission that as stated the RDR was doomed to fail for those lower value investors, which frankly need all the help they can get.

    What RDR has achieved is advisers now having control over their advice, costs and refusing to transact when we can see we are being lined up to take the blame and fall in the future.

    I see most of these suggestions as nothing more than big business trying to manipulate the system for their advantage and return to the 1980. So they can return to the advice market with their over charged and poor offerings, which the RDR prevented. These suggestions are more about profits than consumers.

    Give clear regulatory rules on simplified products, with clear regulatory statement, warning, with agreement from the FOS and FCA of a regulated disclaimer of understanding by the consumer of the risk to be sign and more importantly upheld if a claim is attempted in the future, I am sure the current system could then find ways to advise these consumers using the current Post RDR requirements.

  26. “products and advice that cannot go wrong”? Ha! Wait ’til some lying scumbag CMC helps concoct a complaint and then an FOS adjudicator gets hold of the file.

  27. Currently 526 pages in the FCA handbook GLOSSARY!!!

    Call me a cynic:- new regulations, more pages, more FCA fees

    The merry go round cartel: Nearly all on the ‘panel’ belong to it apart from a bit of powerless tokenism!

    Leave FCA get a job in institution- strenghten insitutions by allowing them to rip up commission agreements whilst keeping/increasing their charges.

    Creating impossible conditions for advisers to be right so leading to over complification of advsing on placing £15,240 ISA allownace into an existing S&S ISA. Earn £250 – cost to do time wise 3-4 hours.

    Designing a compliants system that encourages complainaints. And then promoting mis-sold stuff by throwing mud at the wall

    And so on and so on probably for 526 pages if I had £426m to spend on operating costs all without selling one thing or creating any wealth!!

  28. I’m pleased that one or two people are contemplating re-entry to the real world. Mr Smith has a few thousand pounds available for discretionary spend, ie after he has met all his essential expenses. He is thinking about changing his car, or taking an expensive holiday, or upgrading his property with double glazing. Does he seek financial advice? Does he hell. His local garage, travel agency and double glazing company are all in his ear. He will choose one of them unless someone persuades him that the money would be better spent upgrading his life assurance or providing for his retirement.

    Somewhere long ago someone said that life assurance was sold not bought. However far we have moved from the distribution economy to the search economy, there is still a one ton bag of truth in that assertion. We have to enable people to sell. To do that, we probably have to regulate product at source, make much better use of a permitted activities regime, have any and all charges disclosed in cash, and lose all the stupid labels that RDR has attached to so called advisers, none of which labels are understood by the public, even if they are disclosed in literature, which they often aren’t.

    And, by the by, commission is alive and well. It is now called fees. But it looks like commission, it walks like commission, and it quacks like commission. And it induces bias: tracker funds are popular because they are cheap, enabling the ‘adviser’ to secure his or her income from the client without the whole proposition looking expensive.

  29. Michael Winfield 9th January 2016 at 3:34 am

    What a waste of time, Regulation is in the hands of glory seeking fools, hence the collapse of the savings market, what is the point of investing when the cost is barely covered by the return?
    The providers and institutes have grown rich on the backs of investors and therefore never seriously challenged regulation.
    In any case if Cameron gets his way and we remain in the EU, within five years the FSA will have no relevance. For democracy will be totally in the hands of the un-elected.

  30. Well said, Graeme.

    Pre-RDR I spent an inordinate amount of effort in researching various FSA surveys, ABI surveys, foreign initiatives. I met with Sants, Amanda Bowe, various AIFA luminaries and the one common theme was the clear inability of any of them to understand what consumers want.

    We all have opinions – I can design a fantastic car with all bits and pieces added which will look sleek on a forecourt. Problem is, I.m no mechanic or engineer and the thing probably won’t move and will do 5 to the gallon.

    Until some reality is forced into the FCA/Treasury we will continue to be bedevilled by theorists, professors and all sorts of do-good enthusiasts who are not only clueless, not only creating havoc, but being well paid for it.

  31. Oh Graeme I never twigged you for one who wanted to turn the clock back. Force feeding peope to buy what they never knew they needed or wanted at rip off rates of commission and dreadful retention rates. (Which providers loved at it made them great profits)
    I am now glad that I’m no longer regulated and can guide peope to avoid direct and commission based floggers. (The title of adviser would be totally inappeopriate.)

  32. Trevor Harrington 9th January 2016 at 10:45 pm

    My God …. I have only been up in the mountains for a week … and now look … we have a regulator on its knees, awaiting the final blow from the sword … and no doubt hoping that it is clean and painless … and preferably as personally profitable as has always been the case over the last 30 years ….

    Hooray I say … kill them all … but wait … what is the cost … what is the effect …
    We should think more carefully perhaps ….

    Keep the regulator …. and make them all do the bloody thing properly …. this regulator is the only one that we have … absolutely NO … NONE … NOT ONE PENNY … of early retirement or enhanced pension, and certainly not one single penny of severance pay to any of them …. I say make them do the job properly ….

    Make the regulator see common sense, led by those who know …. those at the front end of face to face financial services …
    That is NOT NOT NOT the people that they have currently lined up for this “committee of failures and vested interests” ….
    That is NOT NOT NOT the people at the top of banks and insurers, or even those who lead networks, or pseudo networks, and failed “would be” federations … such as Gill Cardy – sorry Gill – who have completely and utterly failed their profession …

    All the real answers are much rehearsed and many times discussed on these discussion sites ….
    The issue is this :-
    Who is earning out of these constant and repetitive regulatory errors ?
    Who has been favoured by whom, by being dropped into the top end of this decision making process called Financial Services Regulation, and who are those people really serving ?

    I would recommend that the sword should start at the top ….
    Examine the financial benefits received by whom, and then hack away at the heads of those who are found at fault … and failing their charge and instruction … Sants is a simple one …

    A Knight or two, or three, may well have to fall before we reach the gutter snipes who have long since been lining their nests …

    Indeed, starting at the top may well involve the cabinet office of number 10 itself ……

    You heard it here first ………

  33. Personally, I am FPC plus MAQ.

    For the bulk of customers, that is sufficient IMO to advise on the types of product that are likely to be suitable for those customers. If I do not know the answer, I can say I will come back to you on that.

    Similarly with Commission, Fees are generally better,(although with smaller investments, they may not be viable). But if customer can not/will not pay fees, then the alternative is they are excluded/exclude themselves from advice.

  34. banning regulated advisers from selling unregulated products. this should be done Now

  35. @Richard Wakem. Amen to that.
    As to the rest of the article I think it will be interesting to see what happens with this review. I agree with the sentiments of those who express horror at having to spend months re-qualifying to continue doing what I had done for 23 years prior to RDR. Like one commentator said above the vast majority of advisers only sell/advise on the simple products.
    Personally I hope they do bring back commission for one reason and one reason only. It will allow those looking for solutions to problems the choice they once enjoyed. My proviso to this would be that it must be made clear to the investor/client/consumer or whatever you want to call them that what we are doing for them is not free. They will end up paying this from their product.
    Personally I hate this bickering that goes on in these bloggs….. “The only way to be an IFA is to charge fees”…….. “Ban commission on everything”…….. “commission is the only way to go” …. etc etc.
    There is only one way that works and thats the way our clients want us to do our job for them, be that direct fee, adviser charging via product or commission. It really doesn’t matter

    • I agree. How an adviser charges should be up to them and their business model. As long as costs are completely and clearly explained to clients (and then agreed to by the clients) then anything goes.

  36. Of course the life offices/nationals are going to suggest a lower qualification requirement for basic products. It will allow them to start flogging their own products again. They can resurrect their old sales forces at last while paying them all lower wages than before. The one sliver lining being that it will once again turn on the recruitment tap for the industry as a whole.

    You can argue over the merits of commission v charges until the cows come home but the bigger problem is constant changing of the rules. At this rate every couple of years we’re going to have to explain a different regulatory stance to our clients.

    The only good idea they have come up with is banning regulated advisers from advising on unregulated products. In fact they don’t go far enough. Regulate products properly, allow only regulated advisers to advise and prosecute anyone calling themselves an adviser who isn’t regulated. That in itself should bring the cost of regulation down.

  37. It has been quite rightly highlighted that there is a lack of adviser representation on the panel, another case of those who sit in their Ivory Towers being given the job of reviewing areas of work that they can know very little about. Those who meet with people every day in their homes and places of work are the only people who can understand exactly what concerns those who need and want our help. Its exactly this type of panel make up that has got the day to day advice ndustry into this mess.

  38. Whilst a vasectomy is reversible, I like children and would be happy to have them in my home again more regularly I still don’t fancy the idea of a reversal, I’d rather just help my grandchildren. So much better to move forward and plan improvements to ones life and those round us than try and turn back the clock. We have all aged, got wiser and less fit. The same issues which were highlighted Pre RDR are problem and that is how to encourage people to save (selling via commission helped this), but once again no-one wants to discuss the solutions other than a reversal.
    As I said pre RDR, one solution with a commission ban would have been as with FCA fees allowing the use of Premium Credit to finance consumers advice fees on regular premium related advice AND protection. As this would be in the consumers name, but identify WHO gave the advice, the cost could be controlled and monitored so that someone couldnt end up paying twice i.e. to set up with one firm and switch to another in 2-4 years time (i.e. churn limiting)

  39. Trevor Harrington 15th January 2016 at 8:08 pm

    The simplest solution to the entire discussion is, as is always the case, the simplest remedy.

    1) Maximum “commission” agreement (MCA – I suggest 3% initial plus 0.5% trail) – allowing for any excess charge or fee, which is required by the adviser firm, being charged directly to the client.

    1) Hard disclosure of the initial charge (commission), and the ongoing charge (Trail), including any excess adviser charge over and above the MCA (above), being clearly declared on the front page of all compulsory illustrations, where the ongoing and the initial fee or “commission” is sourced from the product.

    2) Absolutely NO indemnity terms, which impact on the clients investment (allowing for commercial third party payment terms if desired by the adviser firm).

    3) Compulsory pay down (sharing), at a set % rate, of the trail or the renewal (ongoing adviser fee) directly to the specific adviser who is dealing with the client, and a compulsory client ability to stop, start or redirect that payment if he/she so desires.

    4) Compulsory annual statements (in arrears), from the adviser firm, directly to the client showing ALL revenue received by the adviser firm from the clients’ investments, INCLUDING fees that have been charged directly.

    Sorted …

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