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Kim North: Dealing with the death of bank advice

Kim North

Here we are more than six months after the introduction of the RDR and the dust still hasn’t settled. 

One of main intentions of the RDR was to move the financial services industry away from being able to buy distribution and to try to improve customer outcomes. It looks however that the RDR is considerably reducing the number of financial advisers and therefore there will be less people receiving advice which will result in a lower number of positive consumer outcomes.

We are witnessing the death of financial advice on the High Street as the big banks such as HSBC, Barclays, Lloyds and Santander closing their mass market financial advice offerings. Life insurance companies such as Axa and Aviva are also bowing out of providing direct advice due to the increased cost of complying with the RDR.  

The good news is that adviser firms appear to be benefitting from the hundreds of financial advisers being made redundant by the banks. True Potential, for example, has seen a huge growth in adviser numbers as a result of displaced high street bank advisers who wish to continue providing advice and don’t want to abandon their clients. 

But what about the consumer? Money Marketing understands that consumer research conducted by the FCA is evidencing a lack of awareness among consumers about what they are being charged for when they receive financial advice. 

NMG research suggests that for those who have an existing financial adviser the most popular way to pay for advice is to have the adviser charge deducted from their investments.  

The research goes on to report that for those who have not got a relationship with a financial adviser, the way that they think they would like to pay for financial advice is to pay the adviser directly. 

This I believe is due to people not being aware of the true costs of such an approach. NMG then asked this group of unadvised consumers, “what if the adviser charging is higher than you are willing to pay?” Thirty four per cent said they would complete the transaction themselves without any advice.

I believe that the RDR has had a detrimental affect on consumers. Why? There are less financial advisers to see, adviser charging is too expensive for thousands of people and for those that can afford adviser charging it can be 20 per cent more expensive than previously due to VAT. Ernst & Young director Malcolm Kerr believes the FCA is unsettled that the RDR has not actually worked in the way it hoped it would work. 

But what are consumers doing when they want financial advice? The majority of over-55s say they prefer to “do it yourself” when sorting financial matters, according to website All About Money. 

If this is correct, it is very worrying as in my opinion those at pre retirement, alongside those who have a young family need financial advice and access to the better products, whether that be annuities or protection, more than at any other life stage. 

Now is the time for the banks that have switched off financial advice to be educating the huge part of the population who do not use an adviser about financial planning, products and why different products are needed at different life stages. One can but hope….   

Kim North is director at Guide for Advice



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. let’s be clear. The whole RDR fiasco was appallingly hatched and managed by theorists who have all since jumped ship for greener pastures.

    The FSA expected advisers to advertise the changes when they were too busy trying to adapt and survive to worry about such matters.

    The £45m wasted by MAS could have been utilised to some advertising purpose, but no.

    Would the regulator care to comment about whether the massive loss of distribution through advisers and bank staff is a price worth paying for the concerting of their theories.

    Perhaps, like Austria, they should have asked the consumer pertinent non-leading questions to discover what he/she thinks.

  2. ….”Ernst & Young director Malcolm Kerr believes the FCA is unsettled that the RDR has not actually worked in the way it hoped it would work”.

    I hoe the FCA is very very concerned. It hardly takes a brain box to have figured out that this total abortion of a change was not going to work the way it was first intended. There were far too many unintended consequences that were to the detriment of the industry and consumer to even come close to working. There are no good bits of the RDR that I can see. The vast majority of existing clients prefer to pay via the product- what a surprise, so no change from initial commission there then and who, other than the lunatic theorists thought it would be anything other than this? Not many I am very sure. The huge problem that now exists is that the FCA are unlikely to hold thie rhands up and say to the world – we got this catestrophically wrong, lets revert to pre RDR conditions. At best they will change what is here now with yet more innovative theory to try to improve things and that too will fail but by the time that comes to the fore, they will also have changed and the architects of the RDR-2 will also have moved on. The easiest way to soleve this is to return to a situation for where the client has the choice of how to pay for advice – commission, adviser charging or direct fee.

    As long as the client knows what the total cost to them is (like when you get the bill at the checkout at a supermarket), what is the problem. Most clients dont care about individual costs that make up the whole. They do of course need to know what the total bill is and we should rightly let them know.

    Lets get back to get to a situation where the client decides what suits them best, not have some theorist in an office decide what they think is best for the client. Wouldnt that be novel or is it just me?

  3. @Marty 10:48am

    I agree completely. I have no problem with banks charging too much for advice, national firms taking too much in AMC’s or individual IFA’s charging a small fortune in initial fees. What is most important is that the client is made aware of what the cost is to them and how it can impact their investment.

    Taking financial advice from any outlet can be expensive and therefore prohibit the public from engaging with financial services. To remove some of the options of covering this cost was only ever going to make the situation worse.

    If the FSA/FCA was worried about clients being made aware of the cost of advice then i think their time would of been better spent implementing an industry standard illustration format which clearly outlined the costs.

    Just my opinion as usual.

  4. So, if I am to believe this article, the hordes of over 55s who, according to a website ‘all about money’ , (a life insurance comparison site), have completed a survey that states that their clients overwhelmingly say ‘it is disgusting how much commission I pay to an adviser for researching, advising and arranging life cover. I will do it myself once I know how much and what type of cover I need’.
    Obviously they wish to pay ‘All about money’, a similar premium and they wish that this website is paid the same commission (or more) for an impersonalised, generic, no service, totally computer based cover. or do they sell commission free product as standard?
    Any statement from any comparison site needs to be taken with a large pinch of salt, one the size of Cheshire!
    Mind you, the author of the article is a director of a comparison of comparison website, unregulated and is probably hoping to pick up scraps of business via introduction fees. The collapse of Bankassurers must give her hope. On her website if you want free focussed advice on investments you will be glad to hear that LV and Royal London will provide it! Sounds too good to be true!

  5. I gave up due to regulatory costs and no long stop. To many threats and and not enough income to make it “worthwhile” and a few thousand had the same thoughts.
    We are seeing the massive cost of compliance being dumped on the remainder which will drive even more out of business.
    The only upside I see is when the FCA find there are not enough firms left to pay this quangos bills and has to make cut backs itself

  6. @ 8 Jul 2013 2:24 pm
    I threw in the towel too for exactly the same reasons. I even got a job with a nice salary cheque paid each month with no fees, levies, claims or long stop worries. Like being on a paid holiday on a sunny beach! Ahhhhh

  7. @ Nick Wardle | 8 Jul 2013 11:06 am

    ‘I agree completely. I have no problem with banks charging too much for advice, national firms taking too much in AMC’s or individual IFA’s charging a small fortune in initial fees’.

    Just about sums up the consumers view of financial advisers.

  8. ‘the FCA is unsettled that the RDR has not actually worked in the way it hoped it would work’

    Maybe if they had listened when ‘consulting’ the industry it wouldn’t be such of a surprise to them!

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