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Nic Cicutti: Dear John, why you should stay post-RDR

Last week, I received an email from an IFA – let’s call him John – whom I have known for almost 20 years and respect hugely. John is highly regarded by a many of my colleagues, who regularly contact him for his views on stories they are writing. I too have often quoted him when writing newspaper and magazine articles.

John’s decision to email me followed my recent Money Marketing column, in which I suggested that the majority of IFAs appeared to be accepting the new RDR requirements and studying hard for the qualifications they will need after December 2012 – always assuming they want to remain in the industry.

As it turns out, last week also saw a new story in MM, based on a survey by Aifa to the effect that 1,400 advisers have yet to start their quest for appropriate post-RDR qualifications, despite wanting to keep practising.

For my friend John, however, the issue is an academic one (if you’ll pardon the pun). He has had enough. I am sure he won’t mind me quoting him at length because in many ways his views reflect a sizeable proportion of advisers today.

His email, slightly edited, said: “Glad to see you are still upsetting people. Still here, but not for much longer. Passed my 65th birthday in February. Still have the passion and knowledge. I have been an IFA since March 1973 and survived all sorts of attempts by the big boys – banks, building societies, insurance companies – to get rid of independents.

“From December this year, I will not be able to give advice any more because at my age I do not see why I have to sit exams again. This obsession with exams isn’t the right way to go. If exams were the answer, actuaries would still be running mutuals in good shape and final- salary schemes wouldn’t be in the mess they are in today.

“I’m in favour of cleaning up the industry, of course. We run a business employing 40 people, winning awards for excellence and investment expertise, have thousands of clients throughout the UK (86 per cent come by referral from existing clients).

“We manage £700m, don’t charge for switches, don’t charge apart from sharing the normal AMCs of managers, give relationship-based tax and planning advice within that cost and all costs are transparent to all clients. And 94 per cent elect not to pay a fee – I guess even the rich don’t like to pay VAT.

“If the FSA has the RDR right, it will be the first success by academics and bankers. Nonsense from regulators who haven’t a scoobie when it comes to delivering integrity-based advice.”

This is what I wrote back to John: “It’s great to hear from you. I’m amazed to hear you hit 65 a couple of months back as you have always struck me as having the energy of a 35-year-old.

“Given your age – you’ll be almost 66 by the time the RDR comes into effect, I can understand why you feel you don’t want to study for more exams, although I do wonder how much real study would have been involved, given your existing qualification levels and the opportunities available for people to take case-study-based exams with a 50 per cent pass rate, which I’m sure you’d walk.

“Also, your comment about actuaries and mutuals is not entirely fair. The abandon-ment of mutuality was – as we know – part of a wider set of corporate changes, many of them regrettable, that came into effect from the 1990s onwards. Qualifications had nothing to do with it.

“As for the demise of final- salary pensions being trigg-ered by overqualified actu-aries, I take that as a tongue- in-cheek remark.

“What actually happened was a combination of pension contribution holidays by employers, not to mention their use of schemes for industrial restructuring purposes, plus tax raids on pension schemes by New Labour. Yes, actuaries’ estim-ates of future investment performance were often over-generous, but whose weren’t back in the heady 1980s and early 1990s?

“Either way, I certainly respect your decision to quit giving direct advice, though it will be a sad day when you do stop. That said, I’m also left wondering about what happens next at your firm.

“Your email leaves open two possibilities – either you do what many other IFAs your age have done over the years and sell the business, including both the client bank and funds under management and enjoy a well earned retirement.

“Or you continue running the business itself but without giving advice to your personal clients, although I’m sure you would be able to ’oversee’ the advice given to them by your colleagues. In other words, the firm itself retains your hands-on involvement and your clients will be aware of that even though you are not advising them directly.

“Indeed, the chances are that you were probably already ’subbing’ out specialised aspects of your clients’ overall advice proposition to other members of the firm’s 40-strong team – tax specialists, paraplanners, invest-ment analysts, pension specialists and so on. In that respect, relatively little needs to change compared with what you do now.

“I hope you will stick with the industry you have served with such distinction for over 40 years. It would be much poorer for your absence.”

Nic Cicutti can be contacted at



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There are 29 comments at the moment, we would love to hear your opinion too.

  1. “enjoy a well earned retirement”

    Not if he is unincorporated.

  2. Without a longstop, he’s stuffed. He’ll not even be able to sleep at night when he reaches 81, knowing that some chancer isn’t going to try and chase him for money while he’s in his nursing home. THAT is why the longstop should apply to everyone.
    Provided his clients are told he is leaving and to seek fresh advice in the next 15 years, then the new adviser shoudl identify any problems within the longstop period and would be professionally negligent him/herself if they failed to advise action and the new adviser would be responsible for their own negligence for up to 15 years. If the former client failed to take advice in those 15 years, why should they be able to pursue an 81 year old for their own negligence?
    There is NO reasonabl;e argument for the withdrawel of the lonsgtop if you look at teh fact the consumer has to take some responsibility for their own innactions.
    The consumer should have no more, nor no less rights to take action against an adviser, than against a solciitor, accountant, architect, building survey.
    Take teh architect whose buildings should hopefully stand up LONGER than any investment of money, but that does mean they need regular review and maintenance (just like investments as fire regs change, so do tax regs), otherwise they may fall down and it is not the architect’s fault.

  3. I agree with John. There comes a time when you have quite simply had enough.

    The RDR is already shaping up to be a disaster of mammoth proportions but you ain’t seen nothing yet. Come Jan 2013 I predict that we will have 3-6 months without a functioning advice industry.

    The RDR simply cannot work. If there were any demand for the business model it imposes it would already exist and the FSA wouldn’t have to impose it.

    John is right. If the RDR works “it will be the first success by academics and bankers”

    It’s just a shame they are allowed to test their theories without consequence on our livelihoods.

  4. Why would his retirement be stuffed? One presumes his company has Limited Incorporation. One therefore assumes he will sell the shares/business or wind it up, and enjoy his retirement.

    I honestly cannot see in this day and age why an IFA would be unincorporated. Yes, the longstop (of lack of) is unfair, but it’s very simple to avoid the problem.

    And for those still acting in partnership or sole trader – my suggestion is they urgently consider Incorporation and stop the “tail” of business history getting any longer. Your accountants will be able to assist the process.

    Why wouldn’t you?

  5. IFA @ 10:11 is right. It’s pointless to complaint about the lack of a long stop when you can easily sort it out by becoming a limited company. And that’s before you consider the massive tax planning opportunities there are in being able to choose when and how much to pay yourself.

    …anyway, back to the subject – this article isn’t about the irrelevant long-stop.

    RDR is a folly that will destroy the businesses of many good IFA’s like John, remove valuable experience from the advice industry and remove choice from consumers.

    Anyone who wants to stay in financial advice post 12/2012 should be sectioned. There’s no money to be made but worst of all, no pleasure in the job anymore. They’ve made us all civil servants.

  6. Ex - Director of a Ltd Company 19th April 2012 at 11:20 am

    To Tricia Yates @10.30 & IFA @ 10.11. I am sorry to tell you that you are both totally wrong in your assumptions. Being a limted company does not mean a thing in our business from an advice point of view regarding any long stop. The adviser, regardless or being a ltd co or LLP has PERSONAL LIABILITY for the advice given to every client. The only protection your company has is via Company law and guess what? – That doesnt include advice a director gives a client. Trust me I know this to be the case!!!!!! I do hope he enjoys his retirement along with a lot of other IFA’s who will be leaving the business.

  7. I totally agree with John, and will be doing the same, excpet, as Nic suggests, continue to run and market the company.

  8. exams a doddle for those with experience? I think not. I am 53 and have just taken R01 so am now an expert in management speak b******* and the whys and wherefores of the fsa and regulatory process. Biggest load of c*** I have ever studied for which my career to date was no preparation and it was a tough exam which has not enhanced my ability to advise at all. Too old for this nonsense!

  9. Nic, interesting point raised here. Are you endorsing that it is appropriate for an unauthorised individual to “oversee” the advice of an authorised colleague? Not sure the FSA would be too comfortable with that!

  10. Nic have you sat these exams? experience plays a very small part in passing them, more a memory test than what actually goes on between client and adviser.

  11. Anecdote:

    I have 3 sole-trader locums/IFA existing relationships to protect my business/clients if I’m under a bus.

    IFA 1 is retiring in Dec. as decided too old and too expensive for the qualifications he still needs.

    IFA 2 is 99% sure he is altering to just do mortgages/insurance going forward.

    IFA3 is my only remaining ‘locum’ for my whole business.

    Hope he doesn’t find the same bus that I might?

  12. I sympathise with John, at the tender age of 63 I am actually halfway to the required level, my fourth exam this month, one more in June and probably the last one August/September this year and then wait the intermable and inevitable delay in getting my SPS.

    Unlike John, I WILL DECIDE when I wish to leave the industry and retire, not allow some tosspot unaccountable dictator to say whether I can fulfill my obligations to clients I have been proud to associate with for over 30 yrs.

    I WILL NOT segment my client base, dealing only with the wealthy, I will continue to provide full service functions to ALL clients.

    The most important part of our business are the clients.

    Who ever suggested segmenting clients at the FSA, has clearly never read the TCF rules.

    We as IFAs are overburdened with inadequate and incompetent regulators who have no other function that to ensure that within 5 yrs, the majority of the consumer investors will only be able to afford (is that the word) advice on products offered by banks, building societies and direct providers.

    I will obviously wait and see, but if these idiots actions make my practice virtually worthless I may consider taking legal action for loss of business value.

    Pity that we haven’t got a union and if we all went on strike no one would really give a toss.

    AND lastly have you seen that inadequate and totally unsuitable consumer info sheet from the FSA?

    What a waste of paper and ink, tells them nothing.

    Keep in the dark, feed them plenty manure and just like mushrooms they will grow to be eaten up by the banks etc.

  13. To ‘nobody cares’, you are right about exams, I sat one yesterday on pension funding options. The majority of questions were about defined benefit schemes including intricate details of Trustee responsibilities, PPF assessment etc. Surely all DB schmes left are in the public sector that has no IFA/adviser invlovement anyway, aren’t they? So what was the relevance?

  14. Ned
    Thank you for clarifying something for me. I have been meaning to look into segmentation for some time, but not got around to it yet, because everyone is talking about this as a ‘must’ for advisers post RDR.

    It seems to me, however, from the little I have read, that it was purely about sorting out the clients you can make money from, from the rest. I don’t want to do that and it is nice to know I am not alone. I may be forced to, at the end of the day, but I won’t do it pre RDR and hope I can manage in the new environment just the way I always have in the past.
    Now, I guess a lot of people will be laughing at my attitude but I would like to think that I know the decent thing to do, unlike some people at our regulator.

  15. Alistair Paterson 19th April 2012 at 1:56 pm

    Nic, I assume you are deliberately misreading John’s comments. The very point he is making is that being run by highly qualified book smarties didn’t save the mutuals, nor did it save final salary pension schemes. Your comments about why they failed are correct, but John’s point seemed to me to be that if examinations were the answer to everything, then would it not be the case that we might still have mutuals and final salary pension schemes, both of which were overseen and run by highly, highly qualified persons. Sadly, they appear to have been lacking in only one essential quality in amongst the rafts of letters after their names, common sense.

  16. I agree with John’s comments and wish him well in his retirement and may well do the same.

  17. Have a good retirement john. Sell out to the highest bidder (you will need to due to lack of longstop ) and blame the fsa for whatever happens next.
    Leave nick to his ramblings and let him torment the next generation.

  18. Hi Nic. I too am 66 in a few weeks. This is my 48th year in the business. I can assure you that my experience alone will not get me through these exams. I have just taken the last exam I need to get my Diploma and failed it by one mark! I am taking it again in May at a cost of £110. I can tell you that this was after many hours of studying and taking mock exams. I would say that 90% of the exam will be useless to me in my normal day-to-day activity with clients. It mostly is a memory test of European regulations etc and acronyms. I took both the pension exams, which I passed, but most of the content of those is now out of date. What bothers me the most is people like yourself still have no idea what is going to happen. When you scream into the wind long enough, all you get is a sore throat.

  19. I assume Nic is writing about this because it has moved him-perhaps even shocked him; but many of us have been pointing out since this whole fatuous exercise started that people like “John” who have clearly served their clients well for a long period of time would be driven out of the industry by, inter alia, the requirement to take exams at an advanced age. Few listened then except the TSC who were studiously ignored by Hector and his pals who of course are not answerable to Parliament, nor apparently to anyone else.

    I would go so far as to describe what is happening to John as evil. Is this really your first encounter with what is happening to a lot of decent IFAs? Is it not worth a column decrying the situation? Or do you side with one reasonably well known IFA, a frequent name in the forums and trade papers, who described this type of fall out from the RDR as “unfortunate”?

  20. Yes, Nic, I, at the tender age of 64, feel exactly the same way as your friend John. When RDR was announced, I calculated that it would cost me £3800 in courses, exam fees and registrations to enable me to do exactly what I have been doing for the last 25 years – and that is, provide a SERVICE to my clients.
    Funny, isn’t it, that that word seems to be missing from most of these pages and nearly all FSA and FSCS/FOS edicts? I’ll repeat it – SERVICE.

    It has got lost, somewhere, among the myriad rules and regulations that fog and blur the level and type of advice, the method of delivery and the confidence by myself and my clients that I have provided a good service.

    As for retiring gracefully, yesterday I Googled “State Pension Forecast”. Try it. At the top of the opening page is an advertisement from an ambulance chaser inviting people to claim compensation from their adviser for Contracting-Out of SERPs. It’s totally frightening, and the shape of things to come. Do you really believe that the FOS is going to take any notice of all the pressure put on the public, Companies and advisers in 1986/7 to Contract Out through television, newspaper and magazine adverts by the Government, because Government Actuaries suddenly realised that SERPs was running at a 1% deficit? No. Will the FOS consider the temptations of tax-relief and additional incentives as any implication of “misselling” complicity and liability if the potential benefits did not materialise? No. Will they ignore the careful warning that the client could POTENTIALLY receive a larger pension? Yes.
    Will I sleep at night in retirement? Yes, but not because my 25-year record is unblemished by any complaints, but because I took the slightly paranoid but necessary decision to put all my assets, wherever possible, into my wife’s name. Sue away, I have nothing.
    I’m more worried about my wife divorcing me than I am about spurious claims generated by unscrupulous ambulance chasers upheld by an incompetant FOS supported by a corrupt FSA/FCA., although the latter is more likely.

    Roll on retirement.

  21. RDR is nuts. Even the dogs on the street know it.

  22. Nic has missed the point completely with ‘John’ and his exams. ‘I do wonder how much study is involved…given your experience…’. Passing is nothing to do with real life its all about exam technique. I know, I’m 66 and I passed mine last year, but without very many hours of learning exam technique (and EU regs) I would not have stood a chance.

  23. An extraordinary comment from “anonymous” 11.20. He honestly believes an ex-adviser of a wound-up limited company can still be sued for bad advice later on? Why am I funding the FSCS then? Honestly, with such basic business ignorance apparently prevalent in the IFA sector, no wonder so many struggle to understand RDR

  24. Phil Renwick – before you part with another £110 can I urge you to get yourself an examiner’s report from CII? Mistakes happen. A few years back I failed H15 by one point and asked for a re-mark; they sent me a report on one section of the paper only. I then asked for a report on the whole paper, as that is what I had paid for. Besides, it looked as if they hadn’t actually totted up the total for that one section correctly. I didn’t get one. Instead, they then sent me another partial examiner’s report on – wait for it – someone else’s script!

    After lodging a formal complaint, the outcome was that the senior examiner had a look and they agreed to award a pass. Might be worth asking them to have another look Phil? Good luck anyway.

  25. Tricia Campbell 22nd April 2012 at 11:38 am

    Hi Nic

    How about getting the CII RO2 book out and looking up the equations that we need to memorise before making assumptions that you can breeze through these exams

    I have spent over 400 hours study now in total on these exams and still not quite there. Maybe I should have gone down the IFS route as these do seem easier than CII route but too late now. Oh and the 400 hours study have been unpaid in my own time and at my expense. Try picking up a book before making assumptions!!

  26. J Maynard. I wish I could! The exam I failed by one mark was R01 and this is done on a computer. You cant argue with a computer!

  27. To exit the FSA by default on payments seems wrong to me. After putting up with the nonsense for so long I am not going to be coded up as a defaulter at the 11th Hour. I am 65 and have no intention of staying in this madhouse.

  28. When they look back on this (FSA, RDR, FSCS FoS) they will realise that they killed the financial services industry for ‘everyman’ by over-regulation.

    Then the pendulum will swing back towards ‘light touch’ regulation and a whole new cohort of bright-eyed IFA’s will enter the industry and the cycle will repeat.

    Interested bystander.

  29. Good for John ! Why would anyone incorporate unless there was a commercial advantage such as being tax efficient. The additional admin and accountancy fees – on top of FSCS outrageous fees ( and congrats to Martin Bamford – please vote ) and the administrative nightmare which is FSA authorisation. Banks misselling – then negotiate their fines with the regulators – means the costs involved for advisers tied and Independent has increased further agaisnt the consumers. The service levels form product providers has gone down further – and now they intend to compete direct. With 17,000 advisers left – and many unable to complete further examinations by those in authority – who do not seem to share an O Level means more work for less money, abused by financial journalists ( who promoted endowments, recommended pensions AVC’s etc.,) and consumers can not now afford advice. As a financial planner – we do not flog products we look toprovide a lifetime lifestyle cash flow approach – for which consumers who can afford our services pay for it – and those who cannot are driven into the supermarkets and services of Banks and product providers.

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