A few weeks ago, shortly before disappearing on a brief holiday, I wrote a column in which I discussed my disagreements with Garry Heath, the former chief of the IFAs’ leading trade body Nfifa.
Garry had, in his own inimitable style, called for a halt – or at least a lengthy delay – in the rush towards the implementation of the RDR. I disagreed, arguing that the die has been cast and it was too late to stop the inevitable.
Our disagreement produced a massive influx of emails to me and messages on Money Marketing’s website. In the course of the debate, I went back to what the FSA was saying on this issue to see if there was any hint, no matter how remote, that the regulator might be receptive to calls for a stay of execution.
There was no such intimation. Indeed, what was striking from the regulator on the subject was the assumption that the RDR is now a fait accompli. If there was a better definition of “racing certainty”, I have yet to come across it.
One of the clearest indications of this came in a speech in mid-April from the FSA’s investment department head Linda Woodall. Her speech is posted on the FSA website and I would urge anyone who still harbours any delusions on the subject to read it.
Where Woodall appeared to be less confident, however, was in the way she addressed the matter of how consumers ought to be told about the RDR. This has become an increasingly crucial topic. Surveys of IFAs show again and again that advisers want to know what the regulator plans to do to prepare the public for this change.
One of the latest is a survey of Fundweb readers, where a poll found 81.5 per cent did not feel the new rules were being promoted to consumers. The vast majority of advisers want an awareness-raising campaign on the benefits of the RDR, at least according to another survey by Cofunds.
Cofunds sales and marketing director Alastair Conway has a point when he says that given the effort many IFAs have put into preparing for the RDR, both personally and in terms of their business proposition to clients, “they’d like to see that effort matched in raising awareness among the general public of the benefits of RDR and the professional standing of financial advisers.”
Yet the evidence suggests the FSA is unlikely to meet those aspirations. In her speech to the FT Intermediary Forum in London, Woodall told her audience: “Creating awareness is a priority for us and I’d like to share our consumer awareness activity with you today.” At which point, it all started to go downhill.
“To target the right messages, we have segmented consumers into two groups, the ’engaged’ and the ’non-engaged’,” Woodall said. “First, the ’engaged’ – we see this group as people who already seek investment advice. They have a basic understanding of their personal finances and need to know that the way they get investment advice is changing. Research suggests this group represents about 17 per cent of the population.
“The other ’non-engaged’ group represents the rest of the population, some of whom may only seek advice once in a while in relation to a life event, for example, receiving inheritance. While you have a duty to discuss changes that affect your clients, we recognise the importance of the support of the regulator’s view.
“So to reach the ’engaged’ consumer, we have prepared a leaflet designed to give you something to use when speaking to your clients – to help explain why you are creating a fee-charging structure, for example – or to simply hand out as general awareness of what is changing. The leaflet is available to download from the FSA website and has been sent to trade associations and accredited bodies for distribution.”
I have seen the leaflet – it is rubbish. It talks in such general terms about the RDR changes that it is hard to work out what on earth is happening and whether it is for the better or not.
Just as much of a cop-out is the second element of Woodall’s stated strategy, that of “getting out and speaking to consumer groups and organisations…they are the best placed to communicate to [consumers].”
What she is saying is the FSA is effectively abdicating responsibility for directly telling the general public about the RDR in a targeted way.
In fairness, she has a point. It will be radio, newspapers and TV stories as opposed to advertising that will be key to making consumers aware of the new environment for advisers and their clients. But the right kind of advertising and marketing can lay the groundwork for those stories – and on the evidence presented by Woodall, that is not going to happen any time soon.
If this is the case, then the question IFAs must address urgently, plus their trade bodies, organisations like Unbiased.co.uk, and those sections of the life, pensions and investment industry who obtain the vast bulk of their business from independent advisers, is how to mount that marketing effort themselves.
Between all of them, the money is there or some of it. The business case for doing so is also there. What it needs is the political will. Do the various parties have it? Let’s see.
Nic Cicutti can be contacted at firstname.lastname@example.org