Will IFAs be ready in time for the RDR? Do they even want to be? I ask these questions after reading a fascinating article by Martin Bamford in Money Marketing, in which he asks whether thousands of IFAs will run out of time to meet the January 2013 deadline.
He warns that IFAs are in danger of not making it because they are unprepared for the work involved. He points out the FSA has started giving accredited status to professional bodies, allowing them to provide statements of professional standing to financial advisers.
This supposedly gives consumers the reassurance they need that their adviser subscribes to a code of ethics, is properly qualified and has kept their knowledge up to date, by means of agreed annual CPD activities.
Unfortunately, things are not so easy, Martin suggests: “I can envisage a scenario where lots of advisers leave their applications until the last minute, which could cause problems when they discover their gap-filling is not up to scratch.”
An even more worrying scenario could unfold in terms of how IFAs prepare to implement key aspects of the RDR in so far as pricing is concerned. The reality is That things will be a lot harder than advisers imagine.
There are two problems with this approach. The first is that while adviser-charging linked to the implementation of a product purchase decision by a client may seem relatively similar to the current practice of commission payment for the same service, in practice, it is not.
Consumers will expect far greater transparency and while they might have been reasonably happy until now to allow an adviser to charge for his or her services by means of commission, they are unlikely to do so in the future.
Given the above, IFAs need to work out a sensible business strategy that is properly road-tested to iron out any last-minute wrinkles, so there are no nasty surprises in just over a year’s time.
Martin argues: “It takes time to create, test and refine a compelling proposition. This is not something that can happen overnight. It is probably not something that can happen in the space of a few months.”
Essentially, the central proposition of his argument is that IFAs need to buck their ideas up if they want to be ready for 2013.
But what if they don’t, or could hardly care less? What if a sizeable proportion genuinely believe they can just blag their clients?
Increasingly, I suspect that to be the strategy of many advisers.
Some IFAs may hope they have a window of at least 12 months, possibly even a couple of years, before the penny drops with consumers about some of the key aspects of the RDR.
If that is the case, this group of advisers will be thinking, why bother, when there is plenty of time left before any harsh realities have to be confronted? Some of those realities may never need to be confronted at all.
After all, if you are one of the group of late 50-somethings, you may not bother sticking around long enough for your client bank to desert you – and that’s assuming they were likely to in the first place. Under such a scenario, all they need is a couple of years more, give or take, making money off their clients and they are home and dry.
I suspect they may have a point – a hang-on-by-your-fingertips strategy is just as potentially viable as Martin’s one.
My gut feeling is it will take a lot longer than he assumes before consumers genuinely take on board some of the key arguments about what the RDR means to them. Unless, of course, both the FSA and the consumer press do not let up from day one of the new regime.
Which is why, if I were the regulator, I would be willing to spend many millions of pounds informing the public about the RDR, what its potential effect and advantages could be and the kind of questions that clients need to think about asking their advisers.
If I were a journalist on a national paper, I would be telling my readers in immense detail about the changes and demanding that IFAs come clean about the way they charge and what kind of service they will offer their clients in future for the money they receive.
In that respect, the battle after 2012 will be between boring people to death and overkill against inertia and the status quo.
I would love to think that even though some advisers will slip through the cracks and bamboozle their clients for years, the majority will not be able to get away with it.
My worry is I might be wrong and that even after 2013 life for many IFAs will be a case of business as usual.
IFAs like Martin, who believe in better ways of delivering advice, need to club together to make sure it does not.
Nic Cicutti can be contacted at firstname.lastname@example.org