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MPs call for pro-RDR IFAs to speak up

Treasury select committee member Mark Garnier has urged pro-RDR advisers to contribute to the committee’s consultation.

Speaking at a PanaceaIFA RDR event in London today, the TSC member and Conservative MP said the committee needed to know the true balance of IFA sentiment as trade and professional bodies are claiming that MPs are only hearing from a vocal minority.

He said: “On the one hand you have IFAs coming out and saying ’please listen to us’. On the other, bodies like Aifa and the Chartered Insurance Institute are saying ’actually that is not the case, they are a vocal minority coming forward and saying one thing when our members are saying something completely different’.”

Garnier said for every 100 negative letters he receives on the RDR, he receives just one positive letter. He said he wants to test that ratio.

Garnier said: “If you do have people who have got strong feelings, get them to contribute because it gives balance to the debate.”

He asked advisers who do contribute to make sure their arguments are backed up with hard facts so they can be effectively used by the TSC in its consultation.

He said: “We are a pretty dull bunch around the committee, we tend to need data and facts and clearly there is a lot of emotion out there in terms of what is happening to your community. We understand all that but we need evidence.”

Work and Pensions select committee member and Conservative MP Harriett Baldwin said the RDR is “clearly biased” towards larger institutions and would deliver an advantage to banks. She reiterated her concern that the evidence base for introducing higher qualifications is weak.

Garnier said MPs’ ability to directly influence the FSA is limited, due to the regulator being statutorily independent, but suggested that Parliament can influence the regulator.

He said: “My view is that it is better the FSA is stand alone, but equally so it has got to stop being arrogant, it has got to start listening to what is happening with consumers and practitioners in the market place.”

Garnier and Baldwin were responsible for securing the parliamentary debate on the RDR last month.


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There are 31 comments at the moment, we would love to hear your opinion too.

  1. I visited my MP at Portcullis House a few weeks ago to argue for the unchanged implimentation of the RDR – my MP is an ex-member of the TSC, but didn’t seem very engaged and I doubt he attended the debate. He said he had heard nothing – positive or negative – from any of his other constituents so I sensed he was less than interested!

  2. Whilst improving qualifications is good as a long term goal the levels set should not be so exceessive as to potentially take many advisers with great experience out of the industry. Customer agreed remuneration will be of negligible benefit to the consumer in receiving quality advice and may discourage many who need advice from seeking it.

  3. Very concerned about the reported comments from the trade and professional bodies as neither of them have ever asked me my opinion

  4. I have no issues with RDR it has helped the industry tidy itself up. However, my issue is that we are being asked to take diploma examinations in two years, when a student gets three years, they only have their exams to do, we are expected to run a business, look after our clients, adapt to all these MAJOR CHANGES, plus do a diploma in two years. I have been in the industry for 34 years and at 62, am finding this a major stress. If the examination period was reasonable I am sure everyone would be much more accepting of the whole of RDR.

  5. There just maybe a reason why he has not heard from any PRO RDR IFA’s, are there any???

  6. Steven Farrall (Adviser Alliance) 20th December 2010 at 3:38 pm

    Of course there will be ‘pro RDR’ IFA’s. Why wouldn’t there be? For those who are already RDR compliant (and for the avoidance of doubt my firm has been fee charging and all the rest of it since 1995) this is a golden opportunity to cement their monopoly rights and reduce competition.

    But I am fundamentally against any statist bureaucratic imposition of arbitrary standards (on any industry or profession). The evidence is overwhelming that such statist bureaucratic interventions always end up in failure. All such central planning is doomed to failure since the bureaucrats can never have enough information to make any form of accurate calculation.

    This is doubly worse in the FSA’s case as most of their evidence is highly questionable and based on false data. Data often created as fall out from previous bureaucratic failures, notably the Endowment and pensions reviews.

    In regards to the FSA’s ‘consumer detriment’ calculations these are again based on false and assumptive data. It is not a rigorous calculation. Using their methodology it is very easy to prove massive ‘consumer detriment’ from the very existence of the FSA. If you sum their own direct costs borne by our clients and the clients of all FS firms, add in the ongoing compliance costs of the FS indutry (I have seen estimates of between 15% and 30% of all costs), and add to that the deadweight costs of past failures (bailing out lots of banks) you will end up with a ‘consumer detriment’ number that will dwarf any alledged consumer losses from not imposing the RDR.

    All the recent failures in FS can be attributed to failures in state bureaucracies, if analysed properly, not failures in the FS industry. For example the banks failed because of the ludicrous unsound money policies of the last government, plus the destructive effects on all the historical checks and balances of the FSMA 2000 which contributed to massive increase in moral hazard.

    The unhampered free market always produces better outcomes than arbitrary bureaucratic interventions. The RDR is an intervention too far. It will end in tears.

  7. Very few of us would argue with the aims of the RDR. It’s the implementation that’s the problem and I suspect that the 1 to 100 ratio is pretty accurate. Whilst agreeing with the goals, and believing that my business will do well in a post RDR environment, I have written to the TSC opposing the RDR. The FSA could achieve most of its goals with a more humane approach.

    It’s not necessary to trample on people’s livelihoods to increase professionalism.

  8. Anthony Badaloo dipPFS ACPA 20th December 2010 at 3:45 pm

    Perhaps the FSA is well intentioned with the RDR and Raising standards etc.

    However, with issues such as conflicts with European Legislation, Legalities, VAT (HMRC Conflict), Parliamentary concerns, poor timing, outrage from those affected, and most importantly, Millineum Dome type costs and budgets, perhaps it needed a little more ‘consultation’, before being cut loose on the unsuspecting public.

  9. where is he, has anyone seen him?

  10. Tyburn Asset Management 20th December 2010 at 4:00 pm

    I am pro RDR. I think a fair way of handling this is to extend the diploma cliff edge deadline up to 2015, this will give a further 4 years for everyone to reach the required standard. I believe if this was proposed then very few IFAs would leave the industry apart from the IFAs who planning a retirement exit in any case.

    I firmly believe standards of knowledge need to rise however with levels of consumer saving so low IFA numbers must not be lowered. There is no doubt if the RDR goes ahead on its current timeline IFA numbers will fall and this can only be bad for consumer savings levels.

  11. I would love to know which planet that AIFA and the CII live on I have been a member of both over many years but I left both 5 years ago, as they were not representing my views or anyone I know in the IFA Industry.
    This is link says it all, the FSA do not know the truth.

    It uterly disgusts me!

  12. Fraser Brydon - IFA 20th December 2010 at 4:12 pm

    Many of the “vocal” IFAs are pro RDR, I am one, what I seek is a fairer way of implementing it. Please will someone ram home the fact that RDR as propossed will cut many thousands, if not millions, out of the advice loop – right into the banks hands….yes RDR is good news for the sake of sanity water it down and deliver it over time,let it grow to become the best piece of new buisness IFAs have ever had…

  13. I’d like to add that in my opinion the examinations are flawed, in that they seem to focus on issues that will affect a very small minority of the public.

    I’d rather see an open book approach and case studies so that advisers are demonstrating their ability to actually do the job rather than regurgitate factual information that most advisers will never need to use and that will undoubtedly be out of date in a very short time, due to the constant changing legislation we work with.

  14. Can I get something off my chest.

    Qualifications I have no problem with as long as they are suited to my business.

    However, renumeration

    A fee is a fee and I understand that. The client pays it seperately to any investment etc.

    However, CAR.

    Am I right in thinking this is generally taken from the clients premiums – be it monthly or a lump sum for the amount of time it takes.

    ie fee £800, premium £100 therefore the first 8 months is payable to the adviser.

    If so, didn’t one of our recent regulators stop this.

    If I remember rightly didn’t some of the pension companies have a 2 year initial period when nothing was invested as the money was used to pay charges.

    Is this not the same?

  15. Treasury Select Committee Member, mathematically competent? 100 to 1? Do the math Mark.Downsize the FSA, great way to cut costs, They are a “Horse has bolted” Quango.

  16. It seems to me that M.P.s lack skills in what others would call common sense. I remember in 1997 when I took up a case of a what I saw as a serious discrepancy with NI with two local M.P.s. The Tory just could not see a great opportunity to discredit New Labour. The New Labour M.P. spent most of the time debating whether or not I lived in her constituency. I once advised a couple who insisted on paying me by fees. The only advice I felt I could offer them was to invest in a S&S ISA. For that they happily paid me £140 for two hours of my time. How is that fair on the consumer?

  17. When widowers are left relying on the sate,
    When Children without parents have no financial support,
    When people retire without a pension,
    They may have been miss-selling in the past
    But when only 10% of the population have pensions and life assurance compared with 15 years ago at least we can all be grateful that the those 10% had excellent advice from very qualified advisers. The other 90% should what do we do NOW?

  18. AIFA is unsure whether it is fit for purpose? It’s failure to truly represent it’s membership proves conclusively that it is not fit for purpose, and may explain why no-one takes it seriously anymore.

  19. I am pro RDR and feel that the proposed date of 31 Dec 2012 is approaching far too fast. I would definitely support an extension of 12 months.

  20. I don’t think anyone can argue that raising the standards and professionalism of an industry is a bad thing but surely wiping out a generation of highly experienced advisers because of their inability to study, absorb information and then pass a set of exams, which I guess will consist of some very irrelevant questions to the real day to day work they do, is really a very poor show…and I don’t believe it will serve the publics’ best interests.

  21. As anyone who can read will see every contributor here, including those saying they agree with the RDR, feel it is going too far and too fast – to the detriment of the vast majority of the British population. I also agree with parts of the RDR – in principle. I have no trouble at all with a rise in qualifications – especially as I got off my back side, did the hours and hours of evening and weekend study, with a young family, and improved my knowledge backed by rigorous examination. I gave up earning opportunities to study and sit exams, I even lost large sums in study materials, exam entry fees etc,etc. Yes people may have great experience, indeed much more than my 16 years but I have to question why, when so many have been in the profession much longer than I , so few have bothered to go beyond elementary CSE level certification. It is lamentable. Still it has given me a competitive advantage as clients do seek out better qualified advisers.

    So I am not against RDR’s goal of increasing qualifications, indeed I welcome it. Eventually, properly implemented, including some standardisation of the initials and titles we are offered by rival education bodies (FSA please note), we will be truly able to call ourselves a profession – with rigorous examinations taking time to study for and attain.

    I do however object massively to the threat of losing my livelihood if, despite already being diploma, advanced or Chartered status I have to ‘gap fill’. What kind of Frankenstein is this? A practising adviser already qualified to diploma standard or higher is threatened with being put out of business by a new (but similar) diploma standard. And one only formally recognised as recently as June/July!

    For comparison a colleague in IT told me over the weekend that he is going to sit an exam this week – a four hour multiple choice for which he has been studying hard. However he last sat an exam when he was at school. If other professions can do so very little study and examination after obtaining their certificates to trade why are we being so aggressively pilloried? I fundamentally object to enforcing a brand new standard regardless of how well qualified existing advisers are, especially if they are far higher in status than diploma standard already!!

    As a contributor says this is totalitarianism. Where will it end? Will the great and the good re-imposing a similar new benchmark standard in say another five or ten years time? It is against the basic freedom to trade of an open market to de-authorise advisers regardless of how far up the greasy pole they have already climbed. Restraint of trade is surely illegal?

    Then we come onto the much worse aspect (for me) of the ban on commission. Whilst the great and the good may see commission as a dirty word there are stringent rules in place to prevent its abuse. I will not bore you with them now. Also surely commission has grown up as the most efficient menas of adviser remuneration where so few clients have the means, let alone the willingness to fork out reasonable sums up front? If we ban commission then logic says we should also ban other forms of credit. Surely the credit card has been so successful and empowering precisely because most people simply do not have the money to pay upfront for their purchases. Remove the ability to spread payments (via commission) and watch consumer demand plummet. I agree credit, especially high priced unsecured credit can be far too easily granted and very difficult for the unwise and ill disciplined to extract themselves from but it is not evil in its own right. Credit used correctly plays and enormous part in all developed economies. Remove the commission option as a means to pay (why can it not still be an agreed Customer form of remuneration I don’t know) and far from empowering the public with CAR it will disenfranchise them. Sure commission can lead to some obscenely high adviser payments but those relatively wealthy clients who are most able to pay are also typically the best able to negotiate for themselves anyway. Or they recognise the added value of a good adviser (or both). But back with the average IFA client, and potential client, removing the ability to pay in a subsidised manner, with costs spread over time will see the UK financial take up shrink. Surely only the most twisted want that. Learning my trade I called on many houses. Before even entering the road I could tell you, as any good adviser could, roughly how much they would have saved up as emergency cash. It was and remains easy to predict. Remove any savings they make for a ‘blow out’ on a summer holiday or Christmas, or the self employed occasionally setting funds aside to pay the tax man and you will find the average is less than a few hundred pounds. This will not pay for very much advice and anyway few would spend all they had to obtain decent advice anyway. Get real all you regular salaried, employed do-gooders! (Typically who know the cost of everything and the value of nothing). The same people who see Interest only mortgages as inherently bad and in need of banning – oh yeah great ivory towers stuff!

    The RDR principles are fine on paper but the harm and decimation of advice to middle England, not to mention the spiralling cost of its implementation make no sense and Britain will be set back years.

    So where are these advisers who ‘welcome’ RDR? The principles as I have said make sense but cutting our nose off to spite our face makes none at all.

  22. As far as I can tell most of those who have been very vocally pro RDR on these blogs have been mainly investment IFA’s who generally charge a percentage of their investment as their annual fee.

    Whilst asking for their opinion I think looking at their Pro RDR business model is also an important factor to look into as well.

    However the biggest cost to consumers is without doubt the FSA itself and their non stop regulations and costs of implementing them.

    RDR is “petty cash” compared to the FSA so if you want to give consumers a better deal then find a cheaper and easier solution to the problem.

    RDR does not guarantee good advice nor does it mean fees will be fair, so what does it achieve?

  23. I agree wholeheartedly with the majority of the comments made. My personal concerns are the looming exam deadlines and I am sat hear wondering how I am going to find the time to study ‘unpaid’with the downside of being self employed. Finding time for study whilst having a young family are difficult enough without the difficulty of running a good and competant business. Having reviewed the exams it does appear that much of the syllabus is designed for high end clients with very complex financial planning and taxation strategies. The majority of my clients are however only concerned with risk and performance compared to the applicable benchmark. I can’t imagine any of them wishing to sit through a mini lecture each time we meet for an annual review. I have been an IFA for ten years and have a happy and loyal relatively small client bank with perhaps only two relatively wealthy clients. Paying fees/car will not be feasable for many of my clients. The outlook for my business is looking rather bleak.

  24. It’s one thing when Aifa and the CII fail to represent IFA’s it another thing altogether when they lobby against a substantial number of their own when they members.

    It is time for the “lurkers” to get up and be counted. AIFA and CII are part of the problem and not the solution. How much longer are you going to fund them to misrepresent your industry?

    Take you AIFA and PFS fees and give them to Adviser Alliance.

    AIFA, the Networks, CII, FSA and minister are all in the club. Hoban and the former AIFA chair Cummings even worked together and now their former boss is advising Hoban via the RDR implementation committee along with a bucket of pro bankers.

    Mark Garnier and Harriett are taking huge risks with their political career. If you are an IFA reading this and you have yet to “come out” in your RDR stance then the time is now – take action, resign from AIFA and PFS and start to fight where they have failed you.

  25. I would be interested if one of the Pro RDR camp could explain to me why level 4 exams were necessary for something as simple as an actively managed Collective Stocks & Shares ISA or a Unit Trust or an OEIC.

    Yes I understand that these products can be made difficult ( and frequently are by the high charging fee based adviser) and that presumably is the justification behind the exam content that includes questions that really apply more to a fund manager than to those who advise or sell these products.

    Perhaps all will be well and the FSA will finally start to put meat on the bones of the simplified advice process ?

    If I could be allowed to continue “advising” on ISA and OEIC, being paid trail commission, under a simplified sales then the few RDR fans could go away and do what ever it is they want to do.

  26. If people have 30+ years of experience then surely a few exams should be a walk in the park??

  27. @anon 10:34

    if the exams focused on relevant material then it would be a walk BUT the papers I have seen include information that is not applicable.

    The reality is that most products sold are fairly simple – making the setting of an exam quite difficult. It is quite clear that those responsible for setting papers have had to include obscure and irrelevant points simply to be able to ask sufficient questions.

  28. Maybe the reason there are very few vocal pro RDR IFA’s is that they see it has a done deal and believe that the FSA will not listen to feedback so why waste their energy.

  29. I personally am pro-RDR if it’s aim is to drive consumers to seek advice and help build trust within our profession. My concern is that in its current form all RDR will do is create further confusion with consumers in the type of advice offered and provide the banks with yet more opportunities to “bully” consumers into using their poor plans and policies. With such a high percentage of the UK population not trusting banks what a perfect opportunity the IFA community has to stand out from the crowd and show how different we are!!

    I’m all for higher qualifications and raising professional standards too but would support a postponement for a further 3-4 years. Managing any business during the economic downturn is bad enough but in financial services where we have been hit hardest off all… come on, a bit of common sense.

    Like most commentators here, I approached my MP over 2 years ago and all she did was bounce it back to the Treasury who in turn stated it was a matter for the FSA – basically put up and shut up. So where to now??

  30. Anyone who endorses the FSA or any regulatory or supervisory body must be plain daft-good lord its your incomes and livelyhoods we are talking about,do you not have families and commitments?
    Barry Davies has a point you cannot do business in a toilet trained manner although in fairness the IFA’s that exist out there are so stiff i dont know how you do business.Having said that flogging a life assurance policy,a pension or an “investment” is not that hard.The whole industry has been built up to something it is not and never will be.I have interviewed enough,hired and fired life assurance people i speak with sure knowledge about the industry.You welcomed the big bang welcomed regulation and how many of you are now out of jobs,how many have gone bankrupt because of commission clawback? so come on wake up never mind the rdr,SAY NO TO THE FSA!

  31. The RDR is meant to do so many things yet misses the target.

    The regulator rightly wanted to remove provider influence, this is an issue in only a minority of firms, mostly big firms, networks and banks yet the answer is to ban commission. A PFS idea.

    The regulators want higher standards, they think more qualifications will do the job. A PFS idea.

    The regulators want firms to pay compensation without quibble, their solution is more cash in the bank so firms are ‘well capitalised’. A PFS idea.

    The targets will be missed once again because the answer is effective supervision and not more regulations.

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