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Kim North: Education, education, education

Kim North

It is no surprise that almost half of UK life and pension customers are not prepared to pay for advice, according to Ernst & Young. When looking for a new product, 59 per cent of the 1,000 people surveyed said they would use an online comparison website while only 36 per cent would go and see a financial adviser.

E&Y executive director of performance improvement Adam Walton said: “We do not think this is the end of paid-for advice but there is massive education to be done to help customers navigate the new landscape.”

I could not agree more. Distribution for financial planning and product sales will become more complex, with execution-only, basic money coaching, focused, simplified, restricted and whole of market advice offered from next year.

Many distributors will offer more than one type of financial advice and consumers will have different choices depending on their needs.

How does the regulator expect people to fully understand these choices?

The Money Advice Service needs to pull its finger out and start an RDR consumer education project now. The MAS’s annual budget has grown from £43.7m for 2011/12 to £80.8m for 2012/13. It plans to spend almost half of its £46.3m annual advice budget on marketing and brand awareness.

It is not just the commentators who are having a go at the MAS for its ridiculously high budgets funded by an enforced levy on all financial services firms. Labour has tabled a series of amendments to the financial services bill that would place new requirements on firms, investors and incoming financial regulators.

The Financial Conduct Authority, which will regulate 27,000 firms, should ensure consumers, particularly those on low incomes, have access to “affordable and appropriate” financial services and products.

Labour has said the MAS should provide “targeted, proactive and easily accessible advice to those encountering economic disadvantage, financial exclusion or financial exploitation”. I wait with bated breath to see if these good intentions are met.

The 36 per cent of people who will want the services of a financial adviser will be pleased to hear that, according to a recent FSA survey, out of 3,897 firms that responded, 71 per cent said they are already RDR-qualified, with a further 22 per cent studying. Sixty-nine per cent of firms say they have developed and begun to implement a plan to be RDR-compliant across all the requirements. The FSA says the same proportion of firms have begun to tell their clients, or have told their clients, about changes under the RDR.

This sounds optimistic, especially when FSA head of investments Linda Woodall has said only 36 per cent of big firms, including banks and networks, have informed their clients about the coming changes. The FSA has said big firms may be stalling the move to pure adviser charging as their competitors have not yet made the transition.

This means millions of people have not been told by their preferred financial institutions about the changes. The regulator needs to force those it regulates to tell existing clients about the move to adviser-charging so consumers have the option to sort out their finances on a commission basis before this option is gone.

Kim North is director of



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There are 3 comments at the moment, we would love to hear your opinion too.

  1. And no doubt financial advisers will be expected to pay for this free education!

  2. Peter Blackburn 30th April 2012 at 12:02 pm

    The comment ‘When looking for a new product, 59 per cent of the 1,000 people surveyed said they would use an online comparison website…’ is one thing but if people have a need for advice on their strategy going forward, is a comparison website going to help them?

  3. Overall I believe that most of the commentators are as out of touch as the FSA.
    Education. Always good for a headline, whatever the context. Firstly education, if effective, takes time. Secondly, there is no evidence that it has had any beneficial effect on financial services. So really this is just mindless blether.
    The vast majority of people are not in slightest bit interested in “good financial advice”. That is what they may tell researchers, but the reality is quite different.
    Most people do not want to pay for advice. They do want it “free”. And they are happy to pay for it through commissions, and through the nose, so long as the self righteous do not keep calling them idiots. Good IFAs have always ensured value for money for clients. A small percentage do rip off clients, just as a small percentage of MPs milk expenses, and accountants overcharge clients etc. Its part of life, but a small part.
    It was often said that most damage to the working class was inflicted by the middle class intellectual socialist. We are in a similar situation here with the greatest damage to financial advice being created by the middle class intellectual.
    Please go away and read the abundant research that quite clearly states that people and society do not operate in rational or irrational ways. Those are value loaded words that cause their own alternative reaction. People and society operate in ways that are logical to them. The problem is determining that logic.
    People will probably react to RDR in the same way they reacted to pre-RDR – indifference. And from reading a lot of the web input I suspect that the behaviour patterns of advisers will not be greatly different. Yes, there will be a different language to describe the same things; there will be different records, to record the same thing; there will be lots of management-speak eulogies about the new ways to do the same things. But the reality is that the object of the exercise, the consumer, has not changed.
    It is almost impossible to anticipate how society will adapt to various changes. The vinyl record stayed for a long time; the CD came and went in remarkably short time. I bought my first computer in 1978; but the micro really only took off in business in the early 1990s. The iPad has changed fundamental computer thinking in 24 months. The electric car still struggles to make an impact despite massive reportage and advertising. Betamax fell to VHS; New coke was a disaster; the C5 was a sitting joke.
    Despite all the evidence that suggests we really do not have a good understanding of how society works and interacts the FSA have driven through RDR virtually without change, and without any noticeable level of support from either the industry or the consumer. They have not even engaged the public in the changes that are allegedly for their benefit.
    There is no statement of target improvements, nor any way in which those targets will be measured and published.
    The only real impact that RDR has had on the financial community is a massive level of writing on the subject, not even analytical writing.
    We really should be asking what improvements are required and then determining ways of achieving those improvements. Quite often the most obvious approach is not the most effective, so experimentation should have been in place for the last 6 years. Analysis should have been in place for the last 6 years. And a lot of that should have been driven by the adviser community, which is why I suspect that the underlying changes will prove to be minimal.
    Millions of people have not been told of these changes because millions of people are not interested. RDR is a middle class intellectual fetish. I hope it keeps the two dozen of you happy.

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