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Nic Cicutti: Why advisers need some Dunkirk spirit

Have you ever been in a situation where you have spent many months, even years, arguing in favour of a certain idea because you can see its potential long-term benefits?

During all that time, you have had to fend off hundreds of hostile comments from people telling you your opinions are rubbish. Then, slowly at first, the penny finally starts to drop among some readers.

I felt that way last week when I read Money Marketing’s comment that: “It has been a common misconception to suggest the RDR will play into the hand of the banks’ advice operations.

“But since it became clear that the FSA would operate much the same regulatory regime for independent and restricted advice, high-street banking institutions have had to think long and hard about whether they can operate in the bank advice arena.”

The result of all that hard thinking is that they are giving up before the retail distribution review has even come into force. Lo and behold, several banking institutions – notably Barclays and HSBC – are now saying they will not be going down the branch advice route or that they will scrap their tied advice arm.

For years now, I have argued that the application of the RDR equally between IFAs and financial institutions had the potential to impose such a burden on the banks that they would find it difficult to compete with independent financial advisers. Now it is finally happening.

Of course, as I said again and again, of vital importance for IFAs was the need to insist on equally high standards for so-called simplified advice.

In other words, there should be no quarter given to institutions that wanted to find an easier and more direct way of selling financial products – over the phone, for example – without ensuring full regulatory protection to consumers.

This is why I regularly waged battle against, say, the ABI’s attempts to persuade the FSA that simplified sales should be allowed.

Interestingly, when I did so, the number of supportive comments in Money Marketing were decidedly fewer than all the other times when I wrote in support of the RDR.

It is almost as if the visceral opposition so many IFAs feel for the RDR blinded them to its implications for other sections of the industry. Many readers of my column missed the fact that the RDR also has the potential to stop banks and life companies from walking in and eating their lunch.

That is not a given. IFAs need to be organised, professional and to offer a consistent message to clients. They must deliver superlative service at an affordable price, or at least be able to deliver genuine, transparent and quantifiable value over and above that potentially on offer from the big institutions.

None of those demands are impossible to meet, which is why I have always believed so many advisers have been missing the point in their hatred of all things RDR.

Even last week, as Money Marketing told us that “the changing face of bank advice should also be a great opportunity for IFA firms”, others insisted on comparing the RDR to the Titanic’s last journey, in which “frenzied small boat owners” (that is you, I believe) screamed loudly about “a massive iceberg” looming ahead. “You are heading straight for it, can’t you see it?”

If there are comparisons to be drawn between the Titanic and the RDR, they lie in the wilful inability to have enough lifeboats for both crew and passengers, to train the crew properly to carry out an evacuation, to even educate officers how many passengers could safely fit into each lifeboat, as a result of which many were launched half-full. In other words, there was no preparation for what might happen – and eventually did.

To continue with the Titanic analogy, it is almost as if someone decided that the ship was always going to crash into an iceberg and when it did, it was bound to sink. If that happened the lifeboats were completely useless, so there was little point in even having them or in taking part in drills of passengers and crew that might have helped save lives at the moment of impact.

If there is an analogy between the RDR and a nautical event, it is not the Titanic we should be looking to but Dunkirk in June 1940, where a serious military defeat risked turning into potentially cataclysmic collapse. Hundreds of thousands of Allied forces could have been captured but, instead, hundreds of small boats took part in a rescue operation, successfully lifting troops out of the water and bringing them back to England.

Although a significant part of the Dunkirk story is propaganda myth, its central story – that up to 1,000 small vessels and ships saved almost 340,000 British and French soldiers – is true.

In the run-up to January 2013, IFAs can either play the role of panic-stricken doom-mongers or they can get out there and help rescue thousands, perhaps millions of UK consumers. I know which role I would rather play.

Nic Cicutti can be contacted at


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There are 33 comments at the moment, we would love to hear your opinion too.

  1. Correct. But don’t be fooled by the bluster. Come December, 90 per cent of IFAs will be qualified and ready to continue.

    Just don’t expect many to say “I was wrong anout RDR”!

  2. RDR?

    Demand for
    Regulated Advisers

  3. Julian Stevens 11th May 2012 at 9:15 am

    We’re certainly being strafed from every direction and being driven into the sea by squadrons of FSA Stukas, that’s for sure.

  4. Nic I think you missed the point of why the big banks have decided not to proceed with advice arms post RDR. Its really easy – They operate in the mass market and realsie they cant make it profitable. Small IFA’s are no different. Its not a case not having enough potential clients, its a matter of having enuogh people who will be willing to do business with us and pay us sufficiently so we can do it profitably and so still be in business to fullfill our promises of ongoing service to our clients. Have you forgotten that under the RDR any form of factoring for adviser charging by pension providers is banned? Please explain how an adviser can expect a client in the mass market earning £30000pa with all normal household expenditure to write a cheque for £1000 for sorting out a £300pm pension? Answer is they wont because they cant afford to do so. So we need to take payment of £83.33pm from a provider. Are you aware of why 87% of failed businesses fail? Cashflow Nic!!!! Cashflow. We are no different. The RDR is going to be catestrophic failure in terms to the numbers of people taking advice in the mass market. 50% of the reasons will be because they cant afford to wriet cheques for teh advice & the other 50% is because IFA’s will go out of business because of cashflow problems. You know it, I know it, as does the FSA. (This will be on top of potentially 600 IFA FIRMS – not advisers closing due to falling foul of cap ad rules over this latest arch cru debacle but that is a separate issue). The problem is that the FSA couldnt care less as Hector Sants confirmed when in front of the TSC with Sheila Nichol. When asked if the FSA had thout about the potential consequences that the RDR will have on the savings gap. His response was awesome. “The savings gap is not within the remit of the RDR”. What an answer. In other words we are here to change the way advice is delivered and paid for. We have no interest whether a huge number of people cannot access advice. That idiot Peter Smith further confirmed the FSA have, with the RDR, probably put advice out of reach to a large number of people from a commercial point. Get off you high horse for one minute and realise the RDR is good for noone other than the FSA to be able to say to the government “You wanted regulatory reform and we dilivered it. Its not our problem that it does not work and and advisers & consumers will suffer as a result”.

  5. Nic, you think it is you who will say,in your own smug little way, regarding RDR “I told you so”
    It will not happen.

  6. @ Marty Young

    Precisely !!!

    Couldnt have put it better myself !!

    It is the lack of long term REGULAR premium savings/pensions that will ultimately destroy this industry NOT as some smarta*se wealth/exam/fee junkie will say ‘HNW single premiums is what I do’ – how do you think the majority of them got the lump sum in the first place !!!

    I dispair

  7. ‘they can get out there and help rescue thousands, perhaps millions of UK consumers…’

    The process of giving regulated advice properly and profitably will not be applicable to the huge majority of those ‘thousands, perhaps millions…’. so they will be excluded. IFAs with a charitable streak will end up broke, which is unhelpful and destructive, but apparently inevitable.

  8. Soren Lorenson 11th May 2012 at 10:42 am

    anonymous at 8:21am

    Do you work for the FSA statistics department? My prediction is that well over 90% of IFA’s will be RDR ready by 2013.

    The trouble is that will be 90% of a significantly smaller number of firms than exist today.

    By 2014 100% of firms will be RDR compliant, but there will be a fraction of the firms that exist today.

    The RDR business model only works at the top end. It doesn’t work in the mass market and that is where most IFA’s transact most business.

  9. Exasperated Me 11th May 2012 at 10:49 am

    Thank goodness for the Money Advice Service, a cunning plan indeed..

  10. We shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender.

  11. The only parallel with Dunkirk is that it too was caused by cowardice and treachery.

    Why can you not bring yourself to research the matter properly?

    Perhaps talk to somebody who has run a small business that is dependent on its customer’s ability to afford its services.

    Perhaps talk to Sants, Smith and the rest of the rats and ask them why they are not staying to accept the applause that, if you are right, must surely follow.

    Perhaps talk to the TSC and ask them why they accept their fees when they are so blatantly impotent.

    Maybe talk to Hoban and ask why he is a complete waste of skin.

    Just comment fairly and your pay days will be far more satisfying.

  12. The Dunkirk operation was under the control of Winston Churchill. Hector Sants…Winston Churchill? See any similarities? No? Nor me!

  13. Soren Lorenson 11th May 2012 at 11:08 am

    Well done Bob @ 10:59am

    I believe that this sentence should be added to every article and comment on the RDR by law.

    “Perhaps talk to Sants, Smith and the rest of the rats and ask them why they are not staying to accept the applause that, if you are right, must surely follow.”

    It says everything you need to know about the likely sucess of the RDR project.

  14. People will pay for value, show them the value of what you can offer and you will have a successful business. Claim you are adding value while spending 30 mins transferring a policy and taking 3% off the top and you will fail.
    This business is like any other, show your clients what you can do for them and how you will benefit their financial matters and you’ll survive long after 2013

  15. “Interestingly, when I did so, the number of supportive comments in Money Marketing were decidedly fewer than all the other times when I wrote in support of the RDR”
    And that, after all is said and done, is what really matters to you.

  16. Robert Johnsey 11th May 2012 at 11:18 am

    Sorry but I would not charge anywhere near £1,000 to set up a £300/m pension or ISA and if that is/was the type of commission being paid for by the client then they are being grossly overcharged – no wonder the RDR is deemed necessary!

  17. Dennis Burling ACII APFS, Chartered Financial Plan 11th May 2012 at 11:39 am

    What everyone seems to forget is that if the banks are leaving the advice market there will be a huge funding gap for the FSCS when cowboys continue to go bust to be funded by fewer and fewer IFA stallwarts until there are just not enough left to pay the ever increasing bills – what then for advice availability ?? So much for all in the clients best interests !!! Ho Ho Ho what a joke – well done to the FSA & the government for letting it all happen

  18. Nic I can’t help feeling you’re a failed journalist who thinks being contentious is somehow cool. We are not on the beaches of Normandy nor, are we trying to escape Dunkirk in a flotilla of small ships. What we are, are people who have been involved in financial services long enough to know a crock when we see it. Only time will tell what the real impact of RDR will be but having lived through many changes that were supposed to be for the betterment of both myself and my clients I can only say; why is it the top people in the FSA are bailing out seven months before full implementation? Even you must admit this feels very wrong.

  19. Nic. Why not put your obvious talents to actually reporting the effects of RDR rather than muddying the waters. Research for instance the study the FSA did to prove there was a commission bias (which proved there wasn’t) which was the basis of introducing RDR. Then look at the numbers of advisers who were giving ‘ordinary people’ good advice, encouraging long term financial stability for them and then tell us now how many remain in the industry. And then tell us, shout from the headline banners, how many will remain, servicing not High Networth clients but ‘ordinary people’. Then pummell the FSA for their gross incompetency and negligence for bringing these state of affairs to bear on us all. Would that not be a better service for you to offer, to be a peoples champion or is it just too easy to ‘make your bones’ annoying the very people trying to help. Our country is reeling in this recession, not brought about by IFAs etc but they are the ones who can help stem the tide of financial insecurity, bring back confidence to the masses with proper financial planning, call the banks to book, ensure mortgages are fair and equitable and FTB looked after. Trust me, without a robust IFA / broker service, this will not happen as banks by their nature, will continue to line their coffers at the expense of the ordinary man and woman.

  20. What RDR does not really help is the entrance of new blood to Financial Services as how are they going to fund themselves?

    Starting as a new adviser is very costly under the new RDR rules especially with £20k needed as Capital Adequacy, and the ever increasing FSCS, FSA & FOS fees to name just a few.

    Many good advisers will have come through Bank’s and been trained to a certain level, and then moved onto IFA firms to learn more of their trade. Exams are ok but do not necessarily make a good adviser, and certainly do not pay the bills.

    RDR will definitely reduce new entrants to our industry and therefore as other advisers retire/leave then even less to help the population manage their finances. This is of course my opinion but it will happen.

    Finally why are the main players at the FSA leaving before the RDR comes in, if they were confident it will be good for the general public then they have no reason to jump ship do they!

  21. @ Robert Johnsey 11.18am….. Hmmm interested to know what value you place on your time then. Lets look at this for a moment. Assume its a 60 minute round trip to see the client. 15 minutes spent getting pre meeting paperwork in order and sent to client. 2 hours spent in the fact find meeting. (doing all the normal stuff) including the ATR. 2 hours doing the research to find a provider & product. an hour spent concluding the ATR report and reseaching & picking appropriate funds. 1 hour getting the suitability report done properly, checking it and sending (by whatever method you send them). 1/2 hour with provider getting quotes KFD ordered and getting the stuff all prep’d for next meeting. Another 1 hour round trip to 2nd 2 hour meeting with client to review FF, discuss suitability letter, discuss ATR and checking this is all correct and get agreement from client/answer question around ATR report. Cover your findings and going over everything to from research ensure you have got everything correct and the client understands what you have done. For arguement sake lets say it takes 15 min to copy everything to client file and sent to provider. Lets see no I make that 10 hours. So I have earned £100per hour. Out of that I have all my business costs to pay and hopefully make a profit, I have CPD I must do to remain in business, seminars I wish to attend to enhance knowledge, all of which is time away from trying to make a profit. I would submit, Mr Johnsey, that if you are doing your job right, you would be hard pressed to do it less time but I am sure you do take as much care and use as much dilligence as I do and if that is the case, charging anything less than this you do not value yourself as a professional. Good God man even solicitors and accountants with only 5 years experience are charged at more than that. I have 22 years experience in this profession. I think I give flaming good value compared to partners in law firms and accountancy firms. I would be interested to hear back from you (and anyone else) who thinks I am overcharging. Would also like to know what you think you are worth per hour to your clients.

  22. PS I forgot to mention – could get paid £2700 for a £300 pm pension but dont.

  23. To paraphrase another military quote, it is more a case of “lions being regulated by donkeys”.

    I am a firm supporter of the core intentions of RDR; namely professionalism and higher qualifications.

    However, these lofty ambitions are being undermined by a craven and duplicitous regulator that has been corrupted by absolute power.

    When the FSA is finally buried, “Arch cru” will be written on its heart.

  24. Post RDR IFA:
    Why should a dog, a horse, a rat, have life,
    and thou no breath at all? Thou’lt come no more,
    never, never, never, never, never!

  25. @Marty 12:16 Quite right! Sometimes I wonder about the validity of contributors and if they are actually involved ‘at the coal face’ and aware of how financial advice is administered. Is it possible that they are not advisors but are ‘others’ with preconceived ideas?

  26. Nic said it so presumably its official.

    The FSA ARE Nazis!

  27. In 2013 100% will be qualified and then we will see how big a sucess RDR really is and how many can afford to pay their FSCS levey especially if 40% + IFA’s throw in the towel.
    If a few more Arch Cru sized firms go to the wall, the whole thing will be BUST as there won’t be enough IFA’s left to pick up the tab.

  28. I could paraphrase Nic’s opening line by saying that some four years ago, when the embryonic RDR was first rearing its malformed head, naysayers like myself were not in the overwhelming majority.

    Plenty of advisers thought it might prove good and productive and not just for selfish reasons. Now, with barely six months to go, the vast majority of advisers see the RDR for the fraud that it represents. The fraud that pretends to be consumer-friendly when the reality is that the typical consumer will have reduced choice of adviser, reduced choice of payment options and reduced access. Add to this the desne fog of confusion created by the myriad versions of adviser that will seek to remain afloat in the new environment.

    It always astounds me that any journalist or commentator that waves the consumer flag could be taken in by this melange of theories and doubletalk. Martin Lewsi and Jeff Prestridge, both fearsome advocates of consumer rights have spoken out saying how the RDR will limit choice and access and that this must be a bad thing.

    Nic, why don’t you take a leaf from their book and, rather than provoke unrest with your inflammatory writings, actually consider the 2013 marketplace.

    Will online bucket shops and the discredited MAS shore up the defences as advice leeches out of the marketplace? Will we end up as buyers of price forsaking quality?

    Callum McCarthy said the model is broken. I fear he was referring to the regulatory model but didn’t know it.

  29. Gillian Cardy 11th May 2012 at 4:32 pm

    @Marty : I don’t think that the £100 per hour is the problem – I think it’s the time spent that lies at the heart of whether an adviser can make advice affordable to the client. Firstly, strip out 2 hours travel time (save the client paying for it and use those two hours preparing your advice for this client or another one).
    Use an administrator for the admin tasks (which frees you to do higher value work that can’t be substituted by others).
    Make use of your own panels / best advice lists / technology – to shorten the advice process particularly around product and fund selection.
    Make use of templates / standard paragraphs / factsheets written in your own words for standard content – yes I know that you need to personalise but that doesn’t mean you need to go through the whole process every time. And a good paraplanner / administrator can do a lot of that for you at considerably lower cost. Then the expensive bits are the face to face meetings where you really add value with your relationship skills.
    I have to say though that even when looking at a totally new client with the simplest requirements and no history to review I was hard pressed to say you could go through the advice process, however streamlined, in less than 5 hours.
    But with £300 per month going in even £1,000 is settled by 6 / 7 months @ 50% of the contribution or first 3 / 4 months @ 100% of the contribution paying for advice??

  30. Gillian, you are beginning to sound more irritating than martin bamford, and that is saying something

  31. Tricia Campbell 13th May 2012 at 10:51 am

    My company will be qualified and are already there for RDR. My worry as with lots of others is FSA extra levies due to lots of things but main one being compensation for arch cru etc. my team has never sold even one of these products mainly because they did not suit our clients and I didn’t like them. I am now paying the extra levies for the people who did sell them.

    My PI is bound to increase in premium and we cannot put these charges onto our team as we need our team to continue to be independent. My choice is stay put and carry on and help the people who need our independent advice or retrain in another industry and give up 30 years of advising. I am getting fed up continually having the goalposts moved so haven’t decided what to do yet.

    My ship won’t sink it will stay afloat but for how long depends on how long I can be bothered fighting the FSA and these compensation schemes!

  32. Just picking up on Gillian’s comments, I just want to make a couple of observations if I may; the first being that you did not appear to cost in the time for your Paraplanner (£50 an hour?), mute point perhaps, if you agree that a £1,000 charge does not seem out of the way for this case. The second point though, is that I have asked myself whether or not I would pay away £1,000 (or even £500) of my money (upfront) for receiving advice regarding investing £300 per month into a pension plan?

    The answer is no, I would not, and not because I know where to go and what to do! Would I agree to pay an increased charge on my plan over the first 3 to 5 years? Yes.

    Therefore, has RDR taken away choice, or added to the range of options under which the consumer can agree remuneration? If it is the former, then why are the FSA firm in the belief that it is the best outcome for the consumer?

  33. I think the withdrawal of some of the banks from the market, in their old form anyway, was and is an unintended consequence of the RDR but can also be seen as a continuation of the demise of large scale sales forces that has been in progress for several decades now.

    In evolutionary terms it’s a mass extinction event right up there with Jurassic Park and similar in that it’s killing large unwieldy beasts that cannot adapt.

    IMHO those same pressures will also take their toll on other large scale formats as their present apparent profitability will provide only temporary respite.

    So small to medium sized mammal is where it’s at as far as I’m concerned. Lithe enough to change where necessary, personal enough to ensure good client relationships and hungry enough to supplement their diet with the flesh of the dead and dying dinosaurs.

    It’s not Dunkirk Nic.

    It’s Normandy and BTW we are the Allies 🙂

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