I had a wonderful day yesterday. My staff came into my office and asked for a pay cut. No sooner was that arranged than I had the power company phoning to say they were reducing my electric bill and the landlord was reducing my rent.
Filing my car up on the way home I was delighted to see fuel prices dramatically reduced. On my arrival at home, the kids announced they did not want new clothes or toys or food – and my eldest daughter planned supporting herself through college. Only when Scarlett Johannson called to invite me round for dinner did I realise I was dreaming.
I am not the only one given to fantasies if the FCA’s latest pronouncements are anything to go by. There has been much noise of late from our lords and masters, who are apparently unhappy that charges have not noticeably changed post-RDR. The moan is that the model of 3 per cent initial plus 0.5 per cent trail commission has changed into a 3 per cent initial and 0.5 per cent adviser ongoing fee model. Well, isn’t that a surprise?
Why would costs to clients automatically reduce, thanks to the RDR? A message to Mr Wheatley – what got cheaper, Martin?
Costs to adviser firms have certainly not reduced. On the contrary, whereas the trail commission model was low maintenance in terms of its payment, we now have to waste time managing cash accounts for ongoing fees. Added to that, of course, we have section K of Gabriel. Whoever dreamed that up probably spent a previous incarnation torturing heretics for the Inquisition.
Markets drive pricing down, not regulation. In this business, regulation has only ever driven prices up. Some years ago, I took part in a radio discussion with a retired IFA who had left the industry in 1987. His angle was that these days advisers were all paid too much.
“When you were in the business, how much did you pay your compliance officer?” I asked. After a pause, “Nothing” was his uncomfortable reply. “We didn’t have compliance officers in those days.” Right.
And how much did he pay in regulatory fees? He couldn’t remember how much but it was “A small amount to Fimbra”. FOS fees? “No, we didn’t have them.” FSCS fees? “No, we didn’t have those either”. At this point, the interviewer stopped the fight. A colleague who listened in said it was like listening to Mike Tyson working over Norman Wisdom.
The RDR is not the first go that the regulator has had at reducing our incomes without regard to our costs.
Some years back, we had the menu which, the FSA decreed, would force commission down. Nice. Can somebody tell me, please, how I force down Martin Wheatley’s salary or Natalie Ceeney’s or Caroline Rookes’ or Mark Neale’s?
Nothing personal, folks, but they all take home a lot more than me for a lot less hours. I do not believe in the politics of envy. I am sure they all earn their money and they are worth it. But we are too. Who says so? The market. Clients.
It is not like we live in a dictatorship, where we have clients delivered to the door by heavies who jam one arm up their backs while they write a cheque with their other hand. There are no end of alternatives for clients who do not like our pricing model. We do not negotiate on charges – ever. That is my decision.
Clients who do not like our charges can go elsewhere. Martin Wheatley et al, as we know, do not offer us the same option.
Neil Liversidge is managing director at West Riding Personal Financial Solutions