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MPs on the hunt for RDR solution

Treasury select committee chair Andrew Tyrie says although it is clear to many people there is a problem with the RDR, a potential solution is less apparent.

In an interview in this issue of Money Marketing, Tyrie says he is confident the FSA will pay attention to the huge amount of concern expressed in last week’s Parliamentary debate and the current TSC consultation on the impact of the RDR.

Concern has focused on the plight of older advisers unhappy about taking new exams or alternative assessments and the potential damage to consumers caused by a significant fall in IFA numbers.

Tyrie says: “It is clear to many people, including IFAs and wealth managers, there is a problem. It is not clear to everybody what the solution is. The FSA has a proposal which has generated quite a bit of criticism, one of which is it is a one size fits all approach that may cause consumer detriment. That is something we need to examine carefully.”

In his first interview since becoming Aifa director general, Stephen Gay says elements of the RDR “need improvement” but warns advisers against risking their business in the hope the review will be derailed.

At a Money Marketing Pave the Way to Save round table last week, Aifa policy director Andrew Strange warned age discrimination rules mean grandfathering would allow inexperienced bank advisers through the door.

But he added: “For firms that want to work towards the RDR but will take longer to get there, for whatever reason, there should be a way for the FSA to help them with a more pragmatic, transitional period rather than a cliff-edge date in 2012.”

Strange said other solutions to assess competence which are not exams or “pseudo exams” should be looked at.

Also speaking at the roundtable, Cicero Consulting director Iain Anderson said the first quarter of 2011 will be critical. He said: “With any effective lobbying, you should never just adopt the ’we do not like this’ approach. You must turn up, saying ’we do not like this, so we propose that’. The alternative proposal to the RDR as it stands is not on the table with any clarity. From the IFA perspective, that is what needs to happen next.”

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Comments

There are 26 comments at the moment, we would love to hear your opinion too.

  1. The first thing that the TSC should consider is whether there is actually a consumer demand for the RDR.

    The fact that the banks appear to believe that their commission paying restricted advice proposition is going to be a great success would indicate that there isn’t.

  2. Iain Anderson is right in what he says, but the biggest issue I see is whether the FSA will listen to what others have been saying for some time?

    I think they believe that as this has been going on since 2006 they assume everyone was aware of this and so raising so many concerns at this late stage they feel it is too late to change.

    The assumption seems to be if what Mr Hoban said is that AIFA was speaking for all IFA’s when I suspect many feel they were not representing them at all.

    Either way it is no basis to proceed but with no sensible options being put on the table that has the support of a majority, it seems likely the FSA will just plough on as usual regardless of the cost to the consumer.

    The FSA is of course another matter altogether and for me is the real problem we have.

    If we continue to regulate and legislate to protect the consumer when the costs far exceed the benefits then we are on a road to ruin and a never ending trail of paperwork justification for the sake of justification.

    The costs of this so called and often failed system are now so massive (and still growing) it has become a huge industry in it’s own right, yet they produce nothing of value and are like a leech to anything that grows sucking out their share of the growth.

  3. Andrew Strange’s comment re inexperienced bank advisers ignores the fact that these advisers are currently allowed to advise.

    The solution isn’t to rid the market of advisers but to enable them to upskill in those areas where they wish to opperate.

    The banks should be carefully scrutinised as it is perfectly clear that they have historically shown the greatest potential for mis-advising.

  4. The problem is the only real alternative is to leave things as they are and why not? If it ain’t broke, why fix it. Unfortunately this won’t happen as firstly the FSA would lose face and secondly pressure from the banks (who sense a good victory against the IFA sector) will ensure it continues, not to mention the small but vociferous new model adviser lobby.

  5. Iain, are you suggesting that we do the FSA’s job for them? Come to think of it we couldn’t do much worse on some counts. This is hardly the issue here. The FSA are the ones who are not communicating with IFAs not the other way round.
    ASs for grandfathering…what is that all about? Right now we are considered ‘authorised’ why does a change of date change that? It doesn’t in any other ‘profession’ so why ours? Would it have helped the banking crisis?
    As for band advisers sneaking through, come on thety can still ‘sell’ by target and get paid by them after RDR so no possible improvement there then.
    Lets get a balance and get a level playing field not just try and stamp out the IFA once again. So far the IFA has proved a difficult animal to track down and kill.

  6. Experience suggests strongly that the only thing of which the FSA is likely to take note is a firm directive from the Treasury, which is why the support of members of the TSC such as Mark Garnier is so important. Also not to be overlooked is the TSC’s call for the FSA to provide clear evidence that the RDR, as presently proposed, can and will actually deliver what the FSA has suggested. That, of course, rests largely on the FSA’s Cost:Benefit Analysis which we already know to have been wildly wide of the mark on the cost side of the equation. And now the TSC are demanding that the FSA produces something in the way of credible forecasts for the benefits side, which suggests that the original C:BA to have been clearly deficient in that regard.

    So what all this tells us is that the FSA quite clearly launched the RDR on the basis on a totally defective C:BA yet, until ordered to by the TSC, has ignored all calls to revisit it. Hence the support of MP’s in general and of the TSC in particular are crucially important in this latest challenge to the mendacious tyranny of the FSA. Am I right or am I right?

  7. Unfortuatley, some of us and I suspect that is several thousand cannot afford to wait why the FSA deliberate. We are faced with having to decide now whether we sell our businesses whilst we can still secure some value or wait in the vain hope that commonsense will prevail and we can continue to earn a living doing something we have done for 20 years or more.Who was it who said that being self-employed was the most secure means of earning a living,not when you are regulated by the FSA it appears.

  8. Andrew Tyrie is one of the few MPs that has a take on the issues (he was one of the authors of Leviathan at Large) so the evidence to the TSC will be understood by him.

    Structured CPD is the way forward as far as existing advisers is concerned.

    As usual, AIFA’s understanding of the issues surrounding existing authorised advisers is woeful – as portrayed by Andrew Strange’s comments.

    Lets not miss the opportunity of giving Andrew Tyrie and the rest of the TSC the evidence the FSA chose to ignore much less consult on.

  9. If you cogent and well thought out proposals concerning RDR. Please do write to the TSC.

  10. Incompetent Regulators Awards Team 9th December 2010 at 10:25 am

    It’s good to have Andrew Tyrie making noises here as he knows very well about the F-Pack e.g. author of the Leviathan at Large 2000. The prediction were spot on but now we have a much worse and out of control Leviathan run by a load of lying spin doctors lining their pockets. This over indulged beaurocracy has been passed onto the consumer which has been built into the product providers charges and to the detriment of the industry.

    The FSA IS THE PROBLEM IN FINANCIAL SERVICES – period.

  11. I am worried about that these discussions are only around the training and competency. Where are the discussions around commission versus fees? If commission is banned then the advise will be for the wealthy only and the rest of the population will caugth in the claws of the banks.

  12. Personally I feel the anwer is reasonably simple.

    Ask Andrew Tyrie to setup a panel of acive practioners (ie those who are actively advising) and see what solutions they come up with.

    We have the answers, maybe its time they listened.

  13. It has taken a long time coming but at long last I feel that we are now being listened to thanks to all those IFAs who have lobbyed their MPs to get us to this point in time. Keep up the good work everyone.

  14. I am not surprised that this saga continues as with previous comments the FSA have their agenda as they always have and they have been allowed to get totally out of control.

    The main issues in the RDR that need discussion and of course ‘change’ are, capital adequacy, adviser charging and professionalism through examination. Personally I understood that we have had adviser charging in place for years now, am I wrong? My business has followed the model of ‘consumer choice’ and offered the customer payment by, fee, commission or mix of both for so long now that I don’t care to recall how many birthdays I have passed!
    The debate on advisers taking new exams to progress to level 4 ……… the additional exam route has always been available for those who want to progress in this area and have the reward of being able to ‘offer’ advice in additional areas so no change there then. All advisers who are ‘Fully FSA Authorised’ now and have been are well, already authorised to do the job so what next, make them resit their driving test as the roads are now much more busier and therefore more dangerous. I think not! Again back to the most important piece of the jigsaw, the customer, and they have and always have had the freedom of choice to deal with whatever adviser or adviser firm that they feel fit and to request an adviser on level 3, 4, 5 or 6 male or female!

    Lastly, I am sad to hear or read that fellow advisers who have managed to attain the new level 4 status ‘turn’ on their peers and wish them out of the business ……. narrow minded and conceited I feel and mabe you guys should be looking for employment somewhere in Canary Wharf!

    So to summarise we have advsiers in our firm on levels 3, 4 and above and have agreements with our customers for fees only, commission only and a mixture of the both (why should we be forced to sheep dip our customer!!!).

  15. I see one major fundamental flaw in the RDR, that is:

    Bias is bad (even if it is not proven to exist), but the biggest bias – tied is ok, providing those delivering it have academic qualifications.

    Basic trading standards outside of regulation would force you to show the product you sell, not hide them behind you back.

    If you only had only white bread for sale, talking about all types of bread before hitting them with the white bread sale would attract the wrong type of interest from trading standards, it would be seen as misleading the consumer.

    If that basic starting point cannot be made clearer and simpler in the RDR then nothing else falls in to place afterwards.

    This is the very foundation that needs to be put down BEFORE any other discussions take place, the starting point.

    Remember in the worst case scenario if tied was banned currently that would only be 40% of the industry lost, if 50% of those turned to the IFA model only 20% would be lost, the figure that Hoban said was acceptable.

    Of the 20% that could be lost IFA deals could be put in place with private firms to replace those advisers, the same advisers could be re-employed as IFAs.

    Looking at complaint levels there is a good argument for getting rid of tied except for possibly Tax Exempt Savings plans and funeral bonds which possibly could be removed from regulation if the product was regulated.

    This is the crux of the whole problem, deception of clients, talking about everything when you do not have everything to offer them, talking about many different options on product when you do not offer those options on a product, tallking about delivering only advice ie gifting when you do not offer that advice or refer clients to people who do as soon as they fall in to that category.

    Forget any other detail these foundation stones need laying.

  16. If the chairman of the Treasury Select Committee says he is confident that the concerns of MPs will be listened to by the FSA and has actually called for more submissions, then we have reached a significant stage in the whole exercise; namely that all those people, many of whom should have known better, who have spent the last year or two telling us we are wasting our time and that nothing will change have lost that particular argument.

    Without wishing to over dramatise the issues the old cliche is that for evil to triumph all that is required is for a few good men to do nothing. The provisions of the RDR are not evil but I would have hoped for a few more good men to have done something other than sit smugly with their Diplomas and tell everyone else to get on with it and stop complaining.
    As always I should point out that as a Certified Financial Planner I have no personal axe to grind

  17. In all of the recent parliamentary debate, it is surprising how little has been said about the consumer need for the RDR. MPs appear to be representing the interests of advisers in relation to their businesses, not the wider electorate.

  18. @ Anonymous | 9 Dec 2010 12:10 pm

    I think for once the needs of the consumer and adviser are fairly well aligned. I cannot see how a piece of regulation that reduces the number of advisers, removes consumer choice of adviser type and consumer choice of payment method can possibly be of any benefit to consumers.

    To use a motoring analogy, the RDR removes the Ford Focus and requires everyone to buy a Jaguar or walk.

  19. @Tom Scott 12.24

    I understand all the points you make about consumer benefits. The RDR is not perfect – but there are things about the current regime that need addressing. The adviser needs to eb clearly, unequivocably the agent of the consumer – commision brings this into question. Consumers should be able to decide if they think advice is worth what they are being asked to pay for it (at the moment, opaquely, through commision). I agree about the point on access to advice – I think this is a flaw of the RDR. Full advice has been pushed upmarket, but very little (if nothing) has been done to help meet the advice gap that will exist in the rest of the market. Regulation needs to consider this.

  20. I have not seen this reported in the PRO RDR Citywire, the paper that Mark (rubber stamp) Hoban prefers to use to make his pseudo IFA consultation annoucements. Strange that …or perhaps not so strange!

    Well done the band of IFA brothers/sisters that have fought long and hard but remember, leave one FSA spore intact and RDR will grow back and replace itself so the fight must continue!

  21. My comment is simply that IFAs shouldn’t have to provide an alternative to a system that they didn’t devise and which is clearly been shown to be flawed. Also it would appear that some MPs can depend on the trust of their ” clients ” to represent and to re-elect them to an office which requires no specific qualifications why can’t IFAs have the same terms especially if their experience is long standing and measureable. If someone has for example 30 + years experience and only a few years left in their career surely they should be allowed to finish their career possibly with an amount of supervision.

  22. @ Jim Moore

    I’m not sure, if I was an IFA, that I would want my levels of professionalism and qualifications to be compared to an MP’s!

  23. Re Jim Moore.

    I agree about us finding the alternative to a flawed idea – the RDR, it is the very first ideas it is based on which have the problems, not the cherry on the top needing slight adjustment.

    It is the foundation which has the problem, that a consumer cannot know how limited the solutions are, product or advice when or before they sit down with an adviser in plain simple english.

    I have a life assurance plan, a Tax exempt savings plan, income protection and critical illness only.

    What is so wrong with the client knowing this?

    A qualification cannot solve that problem.

    A garage which only does maintenence would not, if you took your bodily damged car to them, take out a piece of paper and write everything down that was damaged on your car for an hour or an hour and a half only at the end of it for the consumer to discover they dont do body repairs or never could do body repairs. Or even worse attempt to be sold a radio or something along the way.

    Only in this industry would this happen as part of a regulated structure, not bad practice.

    Nothing wrong with just having one or two products but why cant the consumer know before they pour out all of their confidential material?

    As long as this continues then consumers will complain and compensation will continue.

  24. IFA Defence Union 10th December 2010 at 12:27 pm

    The solution is to scrap it, discrimination between the distribution of investments and insurance or mortgages is unacceptable.

  25. As an informed consumer, I think RDR IS required regardless of what some of you fondly believe. Some of us remember the pensions and endowments misselling you know, which showed the average IFA up as a greedy, ill informed commission hungry shark. A lot of you are also going to reap the rewards of pensions mortgages which were being sold in the 1980s and will be maturing now….you might regard this as too far back in time to worry about but the insurance industry is unloved by the press and the public, another wave of bad publicity coinciding with the moaning about not wanting to take qualifications is going to look pretty appalling.

    Oh – and I think Ton Scott should be in charge! 🙂

  26. A Nonny Mouse

    You would I assume ban tied advice as this accounts for 98% of consumer complaints?

    Qualifications cannot widen their service offering.

    You are possibly misinformed?

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