Money Marketing readers need to swap their Bermuda shorts for a quiet room to take in what treating customers fairly, the retail distribution review and the markets in financial instruments directive will mean for their businesses.
No point concentrating on only one of these regulatory areas as they overlap and have considerable bearing on each other.
TCF (which friends of mine say sounds like a girl band) is, in my mind, the application of common sense in how we communicate with clients, what we sell them and how we sell to them.
Mifid (a heavy rock band?) is a huge European directive attempting to put European financial services on a level playing field. Do not underestimate Mifid as it will have far reaching implications across business processes resulting in, for many, significantly changing business models at considerable cost.
RDR (an American rapper?) is the review that will create more column inches in the financial services press until the end of the year.
Much discussion has been taking place over how wonderful or how difficult it will be for IFAs to become more qualified. Research commissioned by IFA Promotion shows that three-quarters of consumers would like an IFA who has qualifications above the benchmark. But when six million consumers searched through unbiased.co.uk last year to find an IFA, only 25 per cent selected on qualifications above benchmark.
Research, after all, may reflect what consumers think but not what they go on to do.
Headlines appear such as, Nearly 1,000 achieve chartered status, but how many of them are IFAs? It tends to be the sponsored product provider head office staff that have the time and the financial backing to get to this academic level. The jump to chartered or certified planner will be a hurdle too high for many quality advisers who have the trust and loyalty of their community. Should the level required in exam terms for professional advisers be APFC with more emphasis on continuing professional development and assessment? After all, it has been proved that a 16-year-old can gain chartered status. I, however, would rather have a 50year-old with 20 years IFA experience advising my mum about her pension options.
As the primary adviser flogs expensive sole provider simplified products over bank counters, we must not forget that in today’s market research undertaken by Consensus shows that 90 per cent of consumers are satisfied when they have been to see an IFA. If the RDR rocks forward as written, the distribution market will go back 15 years to being polarised – direct salesforces and independents.
I have heard some nonsense about who in the future RDR world can offer whole-of-market advice. Consumers need to have whole-of-market advice if they are to have the most suitable financial advice. As for making fees-only a prerequisite for professional financial planners, can anybody tell me how many completely fee-based advisers there are now and exactly what fee-based is? The answer is that nobody can, as nobody is able to collect the data. Why then is there a resistance to making commission offset the standard?
The consumer agreed remuneration paperwork could clearly show that the commission comes as a cost from the recommended product and the adviser will be paid according to the time spent and service delivered. No need for the client to write a cheque with VAT added. After all, this is how we buy the vast majority of products in the UK from cars to make-up. We do not pay the salesperson for their expert advice, it is included in the product cost.
It has always been said that IFAs want to be like solicitors and accountants but neither professions have any products to recommend so there is no choice about their remuneration.
May the sun shine for what is left of summer before I drown in client requests to explain what all this regulatory change means.
Kim North (kim@ techand tech.co.uk) is director of Technology and Technical