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Nic Cicutti: The post-RDR clock is ticking


Almost two years ago, when the RDR still appeared to be a rather distant object in people’s rear-view mirrors, I recall a number of articles by Informed choice managing director Martin Bamford, as well as the IFP’s Nick Cann.

Both of them in their own respective ways were desperately trying to wake up a semi-hostile IFA readership to the fact that, while some way away, the RDR was closing in fast.

Back in October 2011, Martin wrote: “It takes time to create, test and refine a compelling [business] proposition. This is not something that can happen overnight. It is probably not something that can happen in the space of a few months.”

Even earlier than that, Nick Cann was expressing his own concern: “When you talk to advisers, they are a mile away from having clarity over what their proposition will be.

“A lot of national IFA firms and networks have not communicated to their advisers the importance and the priority that needs to be given to putting a new model in place given the timetable we are now facing.”

Almost eight months into the RDR and we are starting to see a picture emerging which supports everything that Nick and Martin were arguing back then.

In recent weeks, the FSA has cast an increasingly stroppy eye over the way some financial advisers appear to have made the transition to a post-RDR world.

It would seem many have simply substituted the commission-earning business model they previously used with another one, where the “fee” their clients pay is directly linked to a transaction they carry out – and the charge for that deal, oddly enough, mirrors the commission they earned before December 31 2012.

In hindsight, how did anyone ever think the FCA would simply accept this as a reasonable approach to a new fee-charging environment?

More to the point, what do clients think? Yes, I know that when a goodly proportion of advisers read this question, the immediate response will be that they don’t give a monkey’s – as long as they receive good service from their IFA.

But the reality is that, gradually, things are changing in the outside world – and the consumer media is starting to point this out.

Last week, The Daily Telegraph ran an interesting article on the costs of financial advice and why – according to its headline – more and more people are likely to shun advisers.

The article quoted GfK, a research firm, which found that over the past five years, 63 per cent of people who made an equity-based investment, including pensions, took financial advice. That represents about a million private investors, it said.

But GfK’s latest research, found that of those planning further investment within the next 12 months, one in three now says they would not pay for advice again. The proportion is higher among those with smaller sums invested, according to The Daily Telegraph, which suggests cost is the key reason for this rejection of advisers.

But another issue is clearly service. The paper spoke to one investor who has decided to switch all his investments to a low-cost operation. He told the paper: “My funds hadn’t really been looked at for many years. And I was aware I could save if I went to a broker where there was no commission.

“It took a bit of time to understand and I looked at a number of providers. Now I have everything in one place. And I know exactly how much I’m paying.”

As if this wasn’t enough, last week the FT published a column by its personal finance editor Jonathan Eley, who advised his readers to focus on investment costs at least as much as on performance: “Investors should control their costs precisely because they can’t control company profits, gilt yields, interest rates and a hundred other factors that affect returns,” he argued.

A couple of years ago, I pointed out that “IFAs need to buck their ideas up if they want to be ready for 2013.” But I also asked: “What if they don’t, or could hardly care less? What if a sizeable proportion genuinely believe they can just blag their clients?”

I suggested that advisers might be hoping they have a post-RDR window of opportunity of 12 months or so before the penny dropped with their clients that too many are paying for a service they don’t receive.

Two years later, these comments – as well as those of Martin Bamford and Nick Cann – are beginning to look prescient. Apart from one thing, sadly: the regulator is moving a lot more quickly than any of us could have anticipated to stamp out some of the industry’s less acceptable practices.

If I’m right, the clock really is ticking now. And if it is, rather than wasting his time questioning the minutiae of the FCA’s disclosure rules, as new Apfa director general Chris Hannant was doing in Money Marketing last week, he should be trying to give his members all the help he can as they belatedly try to live up to regulatory requirements that were pretty clear even two years ago.

There really isn’t much time left. Some urgency on the part of the industry’s supposed movers and shakers might yet save some advisers from a serious spanking by the FCA.

Nic Cicutti can be contacted at


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There are 15 comments at the moment, we would love to hear your opinion too.

  1. What a surprise – nothing has changed then.

    Try having a go at the stupid regulator, the RDR was flawed from word-go.

    Interesting you quote Martin and Nik, the former is no longer a regulated IFA with a shrinking business, having lost half his advisers – and the other is off – long term sick.

    Hardly the industries movers and shakers.

  2. * Yawns * The FSA should have had the b@lls to ban fees from products – As usual they go half way.

    2015 RDR 2?

  3. Fletcher Christian 15th August 2013 at 9:42 am

    Richard, your extreme opinions must be coloured by the views from your high-rise, ex-council flat office

  4. Interesting but flawed.

    What Nic and the FCA want to see and what the RDR was set up to achieve are two different things.

    RDR was about ‘customer agreed remuneration’ not the price or how it was charged. The latter are outside the remit of the FCA despite what they would like advisers to think. If an adviser wants to charge in the same way as commission worked then they are entitled to do so.

    If the market decides that’s not acceptable, as Nic seems to think, then it will disappear over time. But let’s be clear – it’s a market issue not a regulatory one (though there will be attempts to link it to regulatory outcomes).

    Just because it suits Nic’s crusade that the FCA talk about this doesn’t change the facts. The best example of this is SJP. They operate within the rules. They laugh in the face of the people who would interfere in the market.

  5. RegulatorSaurusRex 15th August 2013 at 11:00 am

    There are many firms who take annual “fees” for doing nothing, they are the financial product bucket shops.

    Is the FCA going to ban AMCs for “non-advised sales”?

  6. Nic, you are arguing against yourself using the GfK survey. It says that over the last 5 years, 63% took advice, so 37% must not have taken advice. The survey then says that of those investing in the coming 12 months, one in three – that is 33% – won’t pay/take advice. That means more people are looking for advice, not less!! The whole problem with commission was that unscrupulous advisers, particularly banks, pretended that it was a free service for the client, and providers facilitated that. There is nothing wrong with adviser charging, provided the client clearly understands that it is they that are paying. It is all about TCF.

  7. @Richard Bishop..your becoming a bore…. YAWNS…

  8. Another load of nonsense. Client comes in, we advise them the fee, and if they are happy with the cost they sign an agreement. That’s it. A business transaction. A choice the client has made.

    Too many people on their high horses or ivory towers spouting rubbish.

    RDR is done get over it and move on.

  9. @Richard Bishop or is that Richard Cranium ??!!!!!!!!

  10. I really fancy a brand new 4 by 4 but find most of them too expensive. Too expensive to buy and more importantly too expensive for ongoing upkeep and service. Do you suppose the dealer will allow me to say “I will take the vehicle at a much lower price than you are advertising and I will expect any future repairs/maintenance to be undertaken at your expense?
    Dream on.

  11. The Richard Bishop Fanclub 15th August 2013 at 1:42 pm

    I wish Richard would comment on every MM article, at least he doesnt pull any punches or waffle on endlessly.

    And as for this article, I normally enjoy Nic’s musings but lost the will to live on this one.

  12. What you IFA’s just don’t get is the fact that you are just substituting commission for so called fees . Your typical initial charge of 3% initial then 1% an utter rip-off !. I was quoted £18,000 – £24,000 to set up a portfolio of unit trusts – purchase price £600,000. Ask yourselves, would you seriously consider paying that ? – you are living in cloud cuckoo land. For god’s sake, start acting as a profession and not second hand car salesmen

  13. FCA have missed the goal. Contingent fees are not the problem. In fact, there’s a lot to argue in favour of a fee only being charged when some genuine benefit accries to the payer. Paying £1,000 for a transaction that reduces your ongoing charges by more than that amount = value. Paying £1,000 to be told ‘I can’t really improve your position’ stinks.
    The answer is that every transaction shoukd be accompanied by a single sheet of paper that contains just one sentence “I, (client name) agree to a payment to my adviser of £xxx”
    This is then followed by a copy of that document being sent back to the client by the product provider
    That way there can be no nefarious ‘concealing’ of the charge in amongst a raft of other paperwork (which I am 100% positive is going on in some quarters)

  14. The Richard Bishop Conservation Society 16th August 2013 at 7:49 am

    Richard is a national treasure. I was down the gym with him last week and he told two jokes…really, he’s an epic fella.

    C’mon Richard, give us some more gems. Tell us how the FCA can improve the financial world and how about pandas?

  15. Re – The Richard Bishop Conservation Society

    When can I join & do you have a petition to save the Pandas (is that the code word for the long stop ? !!!)

    Re Phil Thomas – 3% of £600k – I think that is a bit steep – But why get upset ? just shop around and get a quote you are comfortable with. You could always go to Hargreaves and pay extortionate fees and get NO advice but hey you seem to know the price of everything and the value of nothing !!

    Have a nice day !!!

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