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Mel Kenny: Will the RDR be a Christmas feast or a lean new year?

When I’m about to sit down to Christmas dinner I wonder if I’ll find myself expectantly awaiting the dawn of a new era in the personal finance industry.

If I glance at the fat goose roasting in the oven I may con­jure up an image of a bloated CII stuffed with millions of pounds of member exam fees and subscriptions. Recession-proof until now, as Bruce For­syth would say: “Didn’t they do well?”

Looking into the new year it will be interesting to see what happens to revenues and whether the CII will revert to passively servicing the needs of advisers, like an institute should, or whether it has grown into a revenue-hungry beast in search of yet more ways to charge fees. It is worrying that its declared surplus is small on such high revenues.

Arranged around the Christ­mas goose will be parsnips – or advisers. Some will be over­cooked having not done their exams. Others will have been in the industry too long and simply had enough.

Another group will sit happily alongside the goose, embracing the splashes of fat having trans­formed their businesses into viable propositions.

And there will be plenty in between: some curled up at the edges after a tiring year, some shrunken in order to move forward and some going through a crunchy phase as high costs take their toll.

I love all types of parsnip but sometimes you get an awful one.

Meanwhile the pigs in blankets – the FSA – are never far away. They are very complementary for some businesses while others would not even have them on the plate.

Everything in small doses, I say. Too much interference and you’ll spoil the dish.

It has been a good few years for the FSA too – another recession-proof organisation – so I’m expecting a double wrapping of bacon.

Then there are the sprouts – the traditional product providers – some of whom enhance the plate while others just leave you with wind. Those gassy sprouts are liked by very few and seem scarce these days.

Carrots play a key part on the plate: they are the eyes of advisers and suppliers, helping them to see the future. With­out them we would be too accepting of the other colourless items.

As the gravy – the RDR – gets poured over everything, it is clear how fine the line is between food being complementary or just a suffocating mush.

Finally the Christmas pudding arrives, soaked in brandy and ablaze, a drunken commission mountain that is no more.

Oh what a silent night!

When the Christmas cracker goes bang I wake up in a hot sweat, for if we are not ready the joke will be on us. After all, we have had six years to prepare.

Mel Kenny is a chartered financial planner at Radcliffe & Newlands


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There are 9 comments at the moment, we would love to hear your opinion too.

  1. For Advisers with HNW client bank things should be fine but for the ones who are fully qualified but struggle to generate 70k plus in fees the “sweat for bread” ratio does not work given the FSA, FOS, PI, FSCS and general business costs.
    In this respect the Retail Distribution Reduction process will be a success with those who have money and not necessarily needing advice getting it and those with little money and needing advice but can,t afford it, not having access.

  2. Maybe some whine as well.

  3. I’ve been advising clients over the last year taking maximum commission on everything, rebrokered as many life contracts as I could and have, as of Wednesday, de-authorised.

    Upto 12 months ago I regarded myself as being a reasonable ifa, qualified to diploma standard. But there came a point round about Febrouary when I thought “f-it – the FSA and FSCS are screwing me over, obviously don’t give a monkeys about clients or the small IFA – F-them” So I have.

    Currently about to spend the next 3 month skiing in Canada then off permanently to Oz. Sad? Not really. The UK is going down the stank at a great rate on knots so every man for themselves and let the FSCS pick up the tab.

  4. Apart from the qualifications hurdle which, it seems, most will have managed to clear, albeit some by the narrowest of margins, the main issue (as I see it) is the extent to which intermediary firms have prepared for 2013 and beyond by adjusting the balance of their revenue streams from initial to recurring.

    It isn’t too difficult, but it will have taken time and those who’ve put off making that essential transition over the past few years may find it very challenging to accomplish in a short space of time.

    Then again, we all desperately need some meaningful respite from the excessive burden of regulation. It will be interesting in the New Year to see a comparison between the number of authorised individuals as at 31.1.2012 and 31.1.2013. My guess is that the difference may well be sizeable and rather greater than Hector Sants finger-in-the-wind estimate (perhaps no more than a finger up his own fundament) of between 8% and 13%.

  5. @Julian Stevens 10.59. I hear you but it would be more interesting to see the figures from 2011 -2013. Not just in terms of advisers but the total number of people who, as of 01.01.2011 were working in this industry and compare that to 01.01.13. Then see how many new (not recycled from other networks) advisers have come into the industry. Answers to the latter on a postage stamp please.

    All we can do is pray that the 2013 sees some kind common sense applied from our illustrious regulators so we can all move on and earn a reasonable living.

    @ Gone for Good – I fear you are not alone by any stretch of the imagination.

    Anyway, ladies and gents
    have a great Christmas and Happy New Year. I hope for that everyone who wants to still be here this time next year, still is.

  6. It does seem that the hypabole was greatly overdone. Most IFAs made the cut and passed their exams. “Passporting” never materialised. Most firms have new Client Agreements and are adapting to factory-gate pricing and adding their fees on top.

    The big losers appear to be the banks, who can’t seem to justify their previous levels of commission.

    Maybe the FSA wad on to something after all?

  7. On what data are you basing your statement that “passporting never materialised”?

    It was an option I was considering at one time (somewhat over-egged by Money Marketing when they ran a profile on me last year), but the upheaval and inconvenience of disengaging from our network (despite what they tell you) plus the loss of support services (which we value) and a narrowing of the range of providers who are prepared to accept business from non-UK registered intermediaries combined to make me very relieved to have managed to clear the qualifications hurdle.

    That said, I suspect that rather more intermediary firms than we assume have indeed made arrangements to secure authorisation from a non-UK regulatory jurisdiction. They just haven’t made a song and dance about it.

    Those of us (the majority) who remain have, I think, a mixture of good, bad and the unknown to look forward to next year.

  8. @Gone for Good | 21 Dec 2012 10:30 am

    Wise move

    The best days are over for small ifa’s. Those left will have high operating costs and reduced margins, trying to sell fees UK plc cant afford.

    Only those with HNW clients will survive.

    IFA industry is going the same way as direct sales did ten years ago – finished.

    UK has an increasing population who have higher living costs, reduced income in real terms don’t need financial products, they need a pay rise.

    The level 6 adviser with a good number HNW will be OK.

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