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Kim North: RDR effects will continue to tell the good from bad


As we enjoy a glorious British summer, it is pleasing that financial sectors are on the up.

According to new research from Merrill Lynch, 72 per cent of fund managers believe the world economy will improve in the next year. Mortgage lending has improved compared to this time last year and is up 30 per cent. This reminds me of the excellent film UP but let us hope the financial balloons do not burst. 

Although the number of advisers is on the increase, with the FCA quoting a rise of 6 per cent from the start of the year to the end of July to 21,684 registered individuals, we need more advisers as market conditions improve.

Adviser firms are now settling in to the RDR, so the hope is further change to financial distribution by the FCA does not cause advisers to leave the industry. Mark my words, the RDR changes will come as the consumer research is showing that trust in financial services is at an all-time low: this month’s CFA Institute’s Investor Trust study revealed that only a third of British investors had faith in the financial services industry.

There is an increased offering online for both products and financial advice and many successful firms are modifying their offerings to fill the advise gap created by the RDR for those who are unwilling to pay fees.

As in all business sectors, some businesses see great success while others fail. Hargreaves Lansdown, for example, should see further success with its telephone-based advice proposition for those with £20,000 or more to invest. Its whole of market independent advice is offered on the basis of a 1 per cent initial and 0.5 per cent recurring charge.

Other businesses will not fare so well. Ivan Massow’s good, in theory, business Pay Me My was set up in September 2011 and offered customers a rebate of future trail commission charged by other advisers in return for retaining a percentage of the rebate but closed earlier this month as the firm was not profitable enough to continue.

I have always found investing clients are not aware that trail commission is paid and even when they do, know as long as the fund performs as it should, the client is happy that the trial commission continues to be paid.

As trail commission is gradually turned off from pre-RDR business, the FCA is looking at the distinction between non-advised commission sales and advised sales. The RDR and the continuing lifestyle preference to run our lives online has driven the mass market to use online non-advised offerings in ever-greater numbers – which are paid by commission. If the FCA takes the commission away from non-advised sales, where oh where is the advisory charging avoiding public expected to go to buy financial products?

It is good news that the ABI is publishing best-buy annuity tables to help those who don’t want to pay fees. It would be even better if the ABI provided non-advised guidance alongside the comparative annuity tables.

Impaired annuitants and older pension plans with guaranteed annuities should be advised before the open market option is taken. Annuity purchase advice is not simple and should be at least guided. 

The ABI site does not mention how important it is to take a spouse’s annuity, the effect on the annuity paid if tax-free cash is taken or how indexation and/or a guaranteed period should be considered. 

The quality of online financial guidance needs to improve across the board.

Kim North ( is director of 


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. There is so much wrong, in my opinion, with the content of this article it is hard to fathom where Kim North has actually been for the last 8 months.

    A Glorious summer? A good few weeks and a few sporadic days of sunshine after the dismal start to summer, and in between the torential downpours, hardly makes it glorious. Maybe Kim has actually been in Florida and didn’t realise it.

    More importantly she believes the FCA spin on the rising amount of IFAs. On top of that she seems to be relishing the thought of more RDR changes.

    Kim, of course, inserts her own bit of spin for online solutions, which is understandable, and mentions Hargreaves Lansdown’s telephone proposition, which, from some the IFA comments I read (and agree with) seemed borderline between what is advised and non-advised, although may be standard HL practice.

    She also seems to want it all ways as she welcomes the ABI ‘best buy’ annuity tables but regrets the lack of guidance, whilst also admitting that annuity purchase is not simple, which it isn’t.

    Nobody should be encouraging people to by an annuity without advice. It is just too important a decision to make, for most people, and I have seen a few that got it drastically wrong. Too many financial ‘advice’ websites are giving the impression you CAN do it yourself (despite the obligatory warnings), which is (partly) why people don’t value IFAs in general and don’t look on us the same as they would a solicitor. The public know they can’t usually handle the law (even the small claims court process can be confusing) but they do think they can handle their own money, as I did when I was in my twenties and not in financial services. Only when I came into this business did I realise how destructive a little information can be, without the experience of an adviser to back it up.

  2. It’s become almost impossible any more to write any new savings or even investment business profitably, particularly if you have to try to meet the FSA’s requirements of independence.

    Fund specific illustrations (why? The fund mix will change over time), fund specific product comparisons (ditto), RU64 pension product comparisons (what’s the point? Nobody contemplating a stakeholder product, that I’ve ever met, is prepared to pay a fee), detailed risk profiling (has risk profiling across a nominal 1 ~ 10 scale even been proven to be inadequate?), portfolio risk profiling, ever lengthening letters of recommendation, etc, etc.

    The best you can hope for is to gather in a bit more long term recurring revenue, but the initial process is a guaranteed loss maker. Or you turn away new savings and investment business on the basis that, unless the client is prepared to pay a sizeable upfront fee, you simply can’t afford to do it.

    And then, of course, there are all the endlessly increasing regulatory levies eating into what little profit you may be able to make. Is this what the FSA had in mind when formulating its RDR? Or, as appears to be very much the case, did it just get completely carried away with no thought for the consequences of all these new impositions, namely that ordinary people will be and are indeed being completely priced out of the advice market? Even discount brokerages such as Hargreaves Lansdown, whose systems and sophistication of marketing are such that small intermediaries cannot possibly compete with them, impose minimum investment thresholds that are beyond the reach of ordinary people.

    How Hector Sants can have possibly denied before the TSC that the FSA has no prejudicial agenda against small IFA’s beggars belief. What was the point of the TSC even asking the question with no evidence to hand with which to support it and with which to challenge Sants’ denial? What response did the Committee expect?

    And, on top of all that, there’s the totally OTT burden of the cursed regulatory submissions every six months, which many people consider to be a total waste of time and money and which serve no userful or practical purpose whatsoever.

    We’re being drowned and strangled in red tape and bureacracy and all that’s happening is that the savings chasm is growing wider and deeper.

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