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Lack of clarity and delays set to hold back RDR

Industry figures predict the FSA’s continued lack of clarity over issues such as platform fees and legacy commission will force it to delay elements of the RDR.

In its platform policy statement, published this week, the FSA said a ban on both cash rebates and payments between fund managers and platforms is “desirable” but more research is needed. The new platform rules, due to be introduced alongside the RDR, have been delayed with no new implementation date set.

The FSA is also launching a guidance consultation on the treatment of legacy commission to begin later this year. In March, it wrote to trade bodies to clarify that legacy commission, additional commission on pre-2013 business triggered by post-RDR actions, will be banned but that trail commission brokered before 2013 can continue. This has created a number of problems over the definition of legacy business which the FSA was initially hoping to solve without needing to consult.

Zurich UK Life principal of government and industry affairs Matthew Connell says: “The lack of a deadline for new platform rules throws into doubt RDR implementation from the beginning of 2013. It raises questions about whether adviser-charging and remuneration rules have to be put back.”

Connell says sticking with the current timetable for adviser-charging risks creating an uneven playing field for different parts of the market and may mean providers have to withdraw initial “post-RDR” products once the platform rules are implemented.

Threesixty head of business consultancy Phil Billingham says: “What was looking like a cliff-edge date encompassing all of the reforms on January 1, 2013 is going to become more like a staggered series of ledges.

“Unfortunately, it does seem that these problems have occurred because the FSA had an insufficient understanding of the marketplace, which was wholly avoidable.”

Aifa policy director Andrew Strange says: “The RDR is a big project. If providers are not ready with adviser-charging but the industry is qualified, then surely the FSA should stick with the qualification deadline but be more pragmatic about adviser-charging. If you only have half the pieces of the jigsaw you cannot put it together.”

Transact managing director Ian Taylor says: “Many people have every sympathy with the goals of the RDR but until the operational detail is grasped and understood, it looks like we will keep moving sideways.”

Will the delay to platform rules and legacy commission consultation lead to an RDR delay? Vote now on our online poll.


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Finally “The Penny Drops”. Most of us who have been accussed of being RDR naysayers have been pretty much ready for the overall aims of RDR, i.e. qualification, capital adequacy and adviser charging, but have been banging on about teh lack of detail with a cliff edge approaching.
    Is it not time, now the penny has finally dropped to take a step back from the precepice of a fixed end date for all parts of RDR and look over the edge and identify a path to get to the bottom and adjust our speed of descent so that getting to the bottom doesn’t result in us going SPLAT…. like a bunch of lemmings

  2. As a self-confessed RDR naysayer, industry dinosaur, commission-junkie and inveterate detester of stupid regulation I sincerely hope that the RDR is postponed.

    Every additional minute brings hope, however minute, that some small measure of understanding and balance will seep into the minds of the decision-makers.

    The RDR, for all of its ‘consultations’, adjustments, fine-tunings and policy statements is still a back of the fag packet response to a dim regulator who wanted to make a splash before he jumped ship.

  3. Wrong Phil in many ways. There are parts of the RDR which can be implemented by 2012 – professionalism and independence. The calls highlighted in this article are not in relation to a large part of the RDR. What is not possible by 2012 is adviser charging. For example we are RDR ready except for adviser charging and can still find business.
    When the FSA cannot or will not explain to us how we can migrate over to adviser charging having promised that they will give guidance, I know they are struggling. The Platform fiasco demonstrates that they have not a clue how IFAs work. Then there is VAT not mentioned above and I do really wonder whether the implications of VAT are fully understood or more importantly will be understood when in the first quarter 2012 we get clarity. Incidentally, capital adaquacy is not part of the RDR so lets get things in perpsective. Much of the RDR will be and can be delivered on time. In the past many of the RDR naysayers have latched on to emotional arguments – now they have a real case to hammer the FSA with and now say the whole RDR should be delayed. What illogicle piffle!
    The illogical and belated conclusion by TSC does not help things, but did the TSC look at adviser charging? The TSC would have had respect from me had they said that Adviser Charging should be delayed because of the unknown re VAT and charging.

  4. The thought of this rumbling on for an extended period is not welcome. Many of the basic aims of RDR are sound, but the flaws, which are pretty serious, will be almost as bad in 2014 or 15. Let’s just get it over with and if the industry is waist deep in casualties by mid 2013 so be it. We have proved ourselves tough, adaptable and resilient in the past and will do do again. It is not fair that those people who have exerted themselves and changed their business models should be messed about any further. The FSA is clear that their research is extensive and that RDR will be good news for virtually everybody – so let’s see how it works in practice. Time to judge by results.

  5. As I posted elsewhere:

    I’m sure I’m not the only one to which this has occurred:
    The FSA sets the agenda, lays down the rules, expects all those it regulates to meet it’s timetable and deadlines and then lamentably (yet again) fails to do so itself.
    I do try not to criticise absolutely everything that the Regulator does, but when taking an ‘audit’ of all the circumstances over the last few years one really cannot help reaching the conclusion that there is much that is sadly lacking. Will it improve under the FCA? How long will it take for the new body to get ‘up and running’. The runes don’t look good.
    Do you wonder at the latest news that tens of thousands of banking jobs will be lost? I am no defender of the banks, but their employees in aggregate are significant contributors to the Treasury’s purse. The jobs aren’t being ‘lost’ just relocated to areas where they can trade with less constraints and less tax. It just shows that contrary to the PR Meister’s blurb – the UK is NOT open for business. Much of it thanks to the Regulator

  6. I’m still trying to figure out how it is that we are expected to market and distribute commodities, that is, financial products, free of charge and therefore free of cost for the manufacturers of the commodities. How can this have got so far? How can people say they are OK with adviser charging? Charging who? Their customers, obviously. But what about charging product providers too, charging them for the work we do for them?

  7. Agree entirely Alan, however the numpties that matter I’m certain will not!

  8. @ Sam Caunt – I don’t think our opinions differ a great deal on RDR. The Cliff edge for multiple isses (including Capital adequacy changes which whilst not part of RDR, were due to take partially effect this year and fully come in by RDR originally)
    Adviser charging, platform and VAT are probably the biggest stumbling block for me personally as although I work on “customer agreed remuneration”, there are lots of faults with Adviser Charging, like you I have my level 4 and will carry on my studies on issues of use/interest to me again now rather than just to be able to trade.
    I do however believe that even a 1 year delay on the qualification deadline will be better for the consumer. I would still argue that it is a restraint of trade and will support thosde who argue that despite not being in that boat myself, but I have made sure I CAN trade post 2013 and my destiny is in my hands and not the FSAs. I would encourage all those who intend staying post RDR and even those who are nearing retirement to continue with their studies, even if they think they may miss the current ro any amended deadline as it will be easier for them to argue for some leeway if they can demonstrate they have tried and are nearly there than to have stuck their heads in teh sand….

  9. @Phil Castle: Phil, you are a good example of an adviser who appears comfortable with the business model – “adviser charging”. I take it then that you are happy to market and distribute products for product providers free of charge? Or are you going to get that money that should be paid by product providers to you from your clients? And you are happy with the concept of product providers getting their stuff to the consumer for free?

  10. My feelings are that there is no need for a delay in obtaining qualifications (I’ll soon be there) but how about some common sense for ‘older’ advisers? In our office 4 active consultants aged 66 – 70 who enjoy their work will be leaving on 31/12/12. What would be wrong with a ruling that advisers over age 65 with a min of 10 yrs experience can practice without further qualifications for another 2 years?

  11. Patrick 4 Aug 2011 – 11.47am ……

    What about the advisers that are younger and have been operating clean businesses for 30 + years and have kids & grand kids all around the house and can’t study. There’s no free time at work as that full by running a business and dealing with clients so wouldn’t your idea be ‘ageist’.

  12. When Adolf Hitler was set on invading Russia, all his generals warned him he was unprepared; insufficient logistics, over extended supply lines and lack of resources.
    Adolf ‘s hubris and complete closure of his ears to highly experienced advice around him drove him to the cataclysm. He wasn’t sufficiently intellectually capable to enable reality and the sound advice to overcome his hubris and potical dogma.


  13. This is entirely predicatble.

    Let’s do the numbers. The Failed FSA has failed, because it is a central planing bureaucracy staffed by ignorant functionaries. All such organisations are ignorant because knowledge is dispersed in society and even those with the knowledge don’t necessarily know what they know, so no amount of market research by such bureaucrats will ever find an answer and in any event, as huma action is dynamic, it is out date the moment they get it. Hence as the FSA has and will always fail, so the RDR will fail.
    The eveidence for this is in the past and in the present. These same regulators protonationalised the banking system by tick box over-regulation and predictably the banking system failed. The solution was to further nationalise the banking system and transfer the debts to the taxpayer, with the predictable result that today the US had it AAA credit rating removed. Don’t think that the UK will be far behind. And the Failed FSA was right in the middle of all this mess. What arrogance makes them think that the RDR will work when pretty well everything else they have done has failed?

    We keep fighting the RDR on the detail. This is wrong. We need to fight the RDR on the fundamental uselessness, if not actual dangerousness, of the existence of the Failed FSA.

    In regards to industry support for the RDR this is tragic but understandable. A lot of people hope to profit from it. This is cronyism gone mad in our sector. It is evil and disgraceful that the pro-RDR lobby as so gung ho for it that they are prepared to see their clients wealth destroyed by crony capitalism as run by a dysfunctional and institutionally corrupt unaccountable quango – the failed FSA.

    You will all live to regret the RDR, whether you are an IFA or a private citizen desperately trying to hang onto your wealth.

  14. Look, delay or no delay, things are not going to get any better for IFAs and clients because there are too many unelected and ill-informed quangos up top. Too many consultations, too many communications, too much paper, and all we get are ‘definite maybes’.
    The FSA introduced RDR without considering ALL the implications, and no matter how many meetings they have they will never undo the mess they have created.
    We’ll keep jumping through hoops like performing seals, and until Hector the zoo-keeper is thrown to the lions we’ve had it.
    I have seen many regulators come and go over 25 years, but no-one yet has manage to create such a vortex of doom like the Financially Shambolic Authority.

  15. We may rant all we like but 2 things should be borne in mind:
    1. Delay (if it happens at all) does not mean cancellation and may just mean that additional imposts might be created in the lull.
    2. The wise will prepare as if the RDR were a done deal. Those that don’t are gambling with their future and their business.
    As to the moaners who say they don’t have time – balderdash. That is the lamest excuse of all. Someone said they had grandchildren getting in the way. Why don’t the parents discharge their responsibility? As to the rest of the time – presumably you are not so busy you don’t get time to watch TV, go to the Pub or socialise with friends, nor are you able to do with a couple of hours less sleep.
    Of course you have the time – you just don’t want to make the effort or the sacrifice. There are 7 days in a week and 24 hours in a day and I refuse to believe that you can’t fit in a few hours of studying somewhere.

  16. Have you ever tried filling a shopping bag with tins, eggs, flowers, washing powder, bread, pots of cream, yoghurt, a six pack and then thrown it in the boot because you are in a bit of an ‘urry?

    No? You wouldn’t be so daft would you?

  17. Andrew Sutherland 2nd December 2011 at 8:55 am

    Morning, a question that I am struggling to find an answer for.. I currently work for a bank and next year plan to become a Financial Adviser, will I get an extension to getting my Diploma?

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