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Old habits die hard: The RDR spin continues


Since Martin Wheatley took over as chief executive of the regulator we’ve seen a marked improvement in the way the organisation deals with the press.

Wheatley appears to get the enormous benefit of allowing the media decent access to senior staff and the dangers of a slightly paranoid bunker mentality which often drove the regulator’s media relations agenda in the past.

Certainly from our own perspective, we’ve been given good access to Martin Wheatley (compared to zero interviews with Hector Sants) and interviews with senior staff whenever relevant policy announcements are made.

It probably helps that people like Nick Poyntz-Wright, with considerable amounts of private sector experience, are now in senior positions, rather than career regulators whose only experience of the media is getting a good hiding.

However, there is one area where Hector’s old habits appear to die hard and we saw this re-emerge last week with the publication of the latest RDR adviser numbers, laden with PR spin. The FCA is hugely conscious that it is open to criticism from politicians and the consumer press over the effect of the RDR on access to advice and will do whatever it can to position the review as a success. 

Take last week’s adviser numbers news. The small and easily explained increase in the number of advisers between the start of the RDR (31 December 2012) and 31 July was sent out to journalists last week as part of a press release hailing the fact that consumers still have plenty of advice options available to them.

However, the regulator was a great deal more reluctant to publish the far more interesting (and relevant) fall in adviser numbers caused by the RDR when they first became available.

After weeks of hassling from our reporter Natalie Holt, the regulator finally gave us the numbers we were looking for at the end of March. We compared these numbers to the best source of FSA research available (estimates of adviser numbers from December 2011), as the regulator does not have actual comparable data.

This showed a 20 per cent fall in IFAs and restricted advisers, compared to their equivalent numbers for December 2011, from 25,616 to 20,453. It also showed a massive but not unexpected 44 per cent fall in bank advisers, from 8,658 to 4,809.

You’d have thought these statistics would be worthy of a pretty big press announcement, outlining the significant effect the new retail policy was having on the market. But no, the only reason the numbers came to light was constant pestering from ourselves. 

However, the fact adviser numbers have risen a bit since the start of the RDR was worthy of a formal press announcement from the FCA. This increase was widely expected as more advisers who missed the initial RDR qualification deadline passed their qualifications and returned to the industry.

Unhelpfully, last week’s press guidance from the FCA made no mention of the December 2011 estimates (these were buried in an accompanying research report). Instead it quoted summer 2012 estimates, which obviously lead to a lower fall when you crunch the numbers as they do not take account of the large amount of advisers who left between the two dates.

Despite last week’s spinning, the fall remains pretty dramatic (although not as much as some predicted). Financial adviser numbers have dropped 15 per cent, from 25,616 to 21,684 between December 2011 and July 2013. Bank adviser numbers are down 47 per cent, from 8,658 to 4,604.

Taking a further step back, adviser numbers are down nearly 22 per cent between December 2010 (FSA estimate: 27,651) and 31 July 2013, reflecting the number of advisers who decided to leave the industry early in the run-up to RDR, alongside those retiring naturally. 

Another big worry is that these figures appear to have been presented by the regulator as the RDR-end game. There is lots of concern amongst the advice profession that some firms have been so focused on reaching the required qualifications that they have not have spent as much time on transitioning their businesses as they should have done and may struggle to make adviser charging work. Many clients are yet to have their first post-RDR review and to a large extent their sentiment on fees remains unknown.

The 31 December 2012 was never going to be a big bang moment as the effect of the charging changes will only be properly understood in the coming years. 

But the frantic spinning shows how worried the FCA is about the way the RDR is playing out in the press, with negative headlines about access to advice overshadowing positive messages about higher qualifications and more transparent charging. 

There’s plenty of debate to be had about the initial success or failure of elements of the RDR and additional changes the FCA might look to make over the next couple of years. 

How much of any advice gap already existed before the RDR? How many of the advisers who have left the industry just retired a couple of years early and what type of service were many customers really receiving from the near 50 per cent of bank advisers that have left the market?

But any such debate should be informed by decent transparent statistics about what is actually happening on the ground. 

The way the regulator has “announced” RDR numbers since the review’s introduction shows there is still far too much nervous spinning taking place as its PR machine looks to influence Westminster and create positive headlines. This is hardly likely to create the right environment for a grown up debate about the success or failure of the biggest regulatory intervention in years.

Paul McMillan is group editor at Money Marketing- follow him on twitter here 


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There are 24 comments at the moment, we would love to hear your opinion too.

  1. Control over the media is a mark of a totalitarian state. Thank god for a free press and long may it continue.

  2. The spin generated by the FCA goes a long way to show just how worried Wheatly and his crew at Canary Wharf really are. Average man/woman have been bypassed for getting advice. With incomes restricted they just cannot afford to pay an upfront fee as well as lets say an investment or pension. With commission it was as if they had a loan repayable over a period.from a source that did not mean they were delving into their bank accounts

  3. @ Anonymous 10:45

    Adviser charge on single premium is no different to commission in absolute terms. So there should be no problem in getting any client, who values advice, to pay – and that has certainly been our experience.

    There remain issues with getting paid for regular premium savings and for advice on bonds but in truth this was a very modest part of our and I believe most IFA businesses – a real pain though for those who do a lot of trust work…

    I had always believed that only a tiny minority were selling Zurich Bonds at 7% commission and 106% allocation so advisers claimed the net cost of their advice was only 1% – despite huge back end charges but then I saw recently that their bond business has plummeted since RDR so perhaps I was naive.

    I had always thought the real issue has been older advisers not being able to pass the exams…

  4. @ Simon
    the real issue for some older advisers was not that they could not pass the exam but rather some of them they could not pass the exam in the time allocated.
    There was nothing wrong with the way they advised, they just liked to take their time or have their paraplanner type up the report.
    The FCA are spinning in their tower.

  5. Paul Standerwick 20th August 2013 at 11:38 am

    Simon Webster; you seem to skirt around the issue of not being able to get paid for regular premium work, because it is a “very modest” part of your business.

    Whilst I agree that operating a fee model is not problematic, in terms of generating profit, it is a huge issue, in terms of getting young/less affluent people to save.

    In addition to this, if we could be properly remunerated, by commission, for setting up a regular premium pension (for example), that would increase our profits – what’s wrong with that??

    Your comments seem to infer, you think it’s ok that certain people have lost access to advice through RDR, because it hasn’t effected your business – I disagree.

  6. Spin is the modern information. It takes good journalism to separate the wheat from the chaff.
    In our case we should be grateful for the efforts of MM.

    However although the unvarnished truth is always paramount assumptions as to the results are another thing.

    Is it really so bad that there are now fewer advisers? When I first joined the industry I well remember an assumption. At the rate of recruitment (in the mid 80’s) it was reckoned that by the turn of the century every working adult in the UK will have been employed in financial services at one time or another.

    Yes this was hyperbole, but does rather point to the question – how many advisers do we need? Is it our task to affect or influence national habits? Is it our task to force feed the unwilling or ignorant? Or do we just react to requests? I know which I prefer as a business proposition. In respect to the former I am neither a social worker nor a member of the government, whose job it is.

  7. Incompetent Regulators 20th August 2013 at 11:48 am

    @ Webster

    You seemed to forget your clients you now serve are those very clients who purchased commission based products years ago to get them where they are now, e.g. being able to pay fees on their investments funds they have saved.

    Problem with this industry it’s full of short sighted people who don’t see the bigger picture, just like the FCA, FOS and FSCS!

  8. I think a bigger concern is their loss of “fees”
    paid by a “percentage”of turnover from about 30% less advisers (Bank, BS, IFA & Tied) that will need to be met by the remainder… 16%
    FCA redundancies???

  9. So, we have a dilemma.. Apparently sales of financial products under the previous regime represented poor value to the consumer (advice seemingly having zero value in this equation) and now the products are supposedly more transparent but there is little will on the part of consumers to purchase advice via fees.

    Due diligence would have uncovered this, so now the market is taking shape and revealing the facts, there is no point in running from reality.

    You cannot have products for sale which have no margin for profit for the distributor. Fundamental principles of economics.

    The market would have gravitated towards self-selection of products and advice as the internet developed and pre-internet clients retired from the ‘advice marketplace’ over the next 10 years or died. So why accelerate the process at vast cost? Let the market determine whether advice is required and in what form. For the next 10 years, face to face advice is very much needed for many and I am specifically talking about the retiring not the 20-somethings..However, will they engage if up-front cost is a factor? Well, I say not, but then I am sure some will say otherwise.

    As for the cost of RDR in real terms, if it continues then bang a few more noughts on the end, but hey-ho, eventually we will arrive at the time that I mention above and then it will be hailed a success no doubt.

  10. I agree with Simon Webster. Much like his business very little of mine is regular premium now. I used to enjoy dealing with younger clients when I was in my 20’s and 30’s. I am not now, so my business has migrated. Where I looking to serve those in their 20’s and 30’s i’d be jumping up and down and screaming at the idiots in canary Wharf instead of simply saying “I told you so” like Harry and I appear to be doing.
    I’d like to see some kind of marketing allowance for distribution of regular savings and pensions, but until auto enrollment has settled down, like many IFAs I have enough work dealing with my target market which is 10 years either side of retirement. i.e. ME and my friends if i retire early (unlikely as I’ll probably do a Harry and work until I drop!)

  11. The FCA will say anything to present the RDR as a success. It is not and no amount of spin will make it otherwise. Whatever happened to clear fair and not misleading?
    They wanted rid of IFAs, but did not bank on the others pulling out of the market. No pun intended.

  12. Total spin as you say.

    At the coal face, there is clearly a supply/demand imbalance.

    I am reducing my advertising budget massively, dropping my unbiased ad to ‘basic’ only and actually sigh when a new enquiry gets in touch and isn’t a referral… Had 3 new ‘strong’ enquiries in 1 hour this week.

    As a one-man band that was my monthly amount pre RDR.

    Not trying to show off, it’s just how it is now and it brings it’s own challenges, capacity issues etc.

    I predict tough times for Unbiased and the Lead generator companies!

  13. Who said ‘free press’?
    ‘free’ doesn’t exist any more.
    Nothing is free and if you think ‘freedom’ is any different then you are not in this world.
    The regulators are happy to talk to the media and use them as a platform for their diatribe.
    Come on chaps, are you so daft as to believe we are anywhere near the truth?
    RDR is a disaster whichever way you spin it.
    Fee charging, what a laugh.
    Talk about ‘spin’ this beats the others hands down.
    Stop trying to validate a system that will never work.
    Now we see disenfranchised younger clients.
    Regular premium contracts don’t earn you your fees!
    This is disgusting and immoral.
    No surprise from you self righteous purveyors of RDR.

  14. Utterly amazed by the comment that older advisers did not do the exams because they ‘ did not have time’!This is utter nonsense ,everyone in the industry new what was coming and had the time an opportunity to take the exams several times, excuses like this are not acceptable for a decline in numbers.Pathetic whining from a small section of the industry will change nothing.

  15. To Paul McMillian: Great article Paul. Can MM please do some research into a list of all the hideous effects of the RDR, its costs its consequences to clients, list all the unintended consequences that have eminated from this piece of rubbish and then also do a copmparison against the benefits of RDR so far. I can only think of 2 – 1 we are now arguably more qualified (but not any better at givingthe advice the huge majority had been giving for decades) and 2) totally agree with customer agreed remuneration. This could have been achieved by a getting a signed letter of agreement from client to accompany the application form so any provider could have paid us what we agree with client. That would have achieved the same thing as the RDR is supposed to have done. Both these benefits would have been achievable without the need of all the change and cost to the industry and in the long rung the client. Once this has been done it should be sent to the TSC and the Regulator should be brought in to answer to these pros and cons. You guys are very good at publicising the information and digging it up from yoru archives so it should be easy to put a list of them together. I am sure your readers and bloggers would be very grateful for such information laid out side by side in an easy to read and digest format. It should also be taken to the press and TV so the the FCA and its predecessor will not get away scott free with try9ng to spin it into something the huge majority of advisers and providers know its not. Thanks

  16. @ Paul B
    No matter how many times I sat the exam I was unable to finish it in 3 hours.
    I simply could not type fast enough.
    I did not find the exam onerous, I just could not do it in 3 hours.
    I am not whining just telling it like it is.

  17. It is quite normal for politicians to dress up failure as success and present a topsy-turvy view of reality.

    Regulators are politicians – some nascent others refugees from larger profit-making organisations where they have been found out.

    The RDR, which was apparently written in stone by 2010 is now seen to be a malleable beast that will adjust over time according to the theorist in charge at that moment.

    At what point will the penny drop at Westminster/ When will it be seen that the deluge of regulation, avalanche of micro-management and box-ticking does little other than waste time and energy that would better be spent assisting clients?

    With all the wrongs and evils that exist in financial services it seems that the regulator is fixated on removing the ability to advise whilst at the same time maximising the ability of opportunists and fraudsters to gain at our expense.

  18. You are so right Alan
    Mark Hoban has moved on from Financial services and was on the BBC this morning spouting rubbish about the government backing entrepreneurs.
    Just more spin, getting the unemployed to create their own jobs whilst claiming it is all governments doing.
    Vote UKIP

  19. Very soon we will begin to see mass financial problems. People with no pension but forced to work until age 68 for some scraps of state pension.

    How is that possible for a working man?

    Debt, student debt and no savings.

    The issue is i will not go and sell, yes sell, a pension if its a 100 pm regular premium to earn £3 per month. Fuel paper and time say id be better off in McDonald’s.

    No one is saving and even if someone has £100k in a pension which contrary to what people on here think, is a lot for many working tradesmen etc. £2k per year, taxed, index linked pension is not enough to pay the gas bill

    Most IFAs now just move one pension to another and take a 3% fee.

    No one is out selling regular premium business, soon the baby boomers funds will be vested and that will be the end of the era.

    Poor older people, working till they drop dead, suicide being a more realistic option for 65 year olds and a miserable life.

    Is it really wrong to sell a pension to a tradesman and get a commission?

    Bring back commission on regular premium business to encourage our country to save.

    All that is happening now is 5% of regular premiums is being take, plus an advice charge plus an amc. It was cheaper before if it was just an amc.

    The fca should now be on the backs of execution only, non advised, unregulated advice rather than picking advisers up if they didnt dot their is and cross their ts.

    Its pathetic

  20. @anon 11.04pm

    Spot on – I’ve been saying the same thing for years !

  21. Anon@11.04
    It would not even amount to £3 by the time the regulator, hmrc, fos, compliance, rent, telephone stationery, gas, and electricity were all paid for. In fact you would end up subsidising the transaction.
    Not forgetting that you will remain liable to infinity and beyond.
    Perhaps Hoban was correct. We would all be better off working in McDonalds.

  22. Utter lack of joined up long term thinking 23rd August 2013 at 12:52 pm

    Anon 11.04
    You are exactly right. What our esteemeed regulators dont understand is that most people NEED to be SOLD to. Its all well and good them saying that “advice”E should be free of commission, prob agree, but what SOCIETY needs is actually for people to START saving for their retirement, and that needs a push and requires product selling not advice!
    Of course we dont want to go back to rip off terms, but surely we could have agreed kitemarked simple products that allowed providers to offer products that offered a good deal to clients, a decent pay rate to the “sellers” and a long term profit to the company. People earn commission for selling you houses, cars, holidays, food, leisure etc – why on earth should pensions be deemed to be different

  23. I’m am older adviser and found the level 4 exams a challenge for various reasons. Firstly; the CII are so up them-selves with the way they set out their programme it bore no resemblance to what I do in any capacity. Then there was the reading/learning material which was so boring, worded badly, didn’t cover the full syllabus and was painful to endure. I paid for a couple of training days which were good but only covered half of what I needed in a specific area. The time factor was definitely an issue because believe or not having been forced to do something I couldn’t really see a benefit from it is extremely difficult to motivate yourself in this situation. And, dare I say it; it gets harder to study as you get older especially when you don’t even enjoy the subject matter.
    When will I apply this new found knowledge because it’s not being used now that’s for sure?
    The people who decided this was the way forward at the FSA have all jumped ship so what does that say in reality?
    Incidentally; I already held a level 5 equivalent examination from my vocational learning previously but of course this wasn’t recognised but I would argue an HND in Business Studies was just as relevant as being able to manually calculate a NIC payment at breakneck speed.

  24. The impact of RDR on the adviser market has clearly yet to run its course. The most likely direction is for more firms to become ‘restricted’ and for business models to contract in response to those clients willing to pay a fee and to ensure an acceptable profit level. As a consequence more and more people will find themselves disenfranchised from advice either because they do not see the value in paying for advice or are not the target market advisers want. There is the risk that more people make investment decisions in the world of the internet and world wide web. Let us hope that this vacuum is not filled by unsafe products marketed direct.

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