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Paul Hogarth: There is no need to delay the RDR

The big news in our industry over the last couple of weeks has been the Treasury select committee’s report on the retail distribution review and its recommendation that it should be delayed by 12 months. This started quite a debate, with the obvious people and organisations coming out with the usual comments.

I am glad the RDR is deemed important enough to receive such attention and I broadly welcome the comments of the committee but I do not think the report will alter the timeline or content of the RDR, nor do I think it should.

It would be easy for the FSA to use the TSC’s paper to buy itself more time. It has not. On the contrary, the FSA has shown itself to be completely committed to the initiative and the timescale and this is to be commended. Hector Sants has already said as much following a sternly worded letter from TSC chairman Andrew Tyrie.

I can see both sides of the argument but ultimately believe the deadline of 2012 should stay in place and that advisers should work, if they are not already, towards ensuring they are prepared for it, looking for support in getting there if necessary.

I have always felt the RDR should not be seen by IFAs as a set of challenges to overcome but rather as a host of opportunities for those firms able to accept and embrace the changes that are coming.

Those changes have been coming for years. All the RDR is really doing is formalising the process for those forward-thinking enough to have seen the inevitable and laying down the law for the others.

Now more than ever advisers have the opportunity to alter the relationships they have had with traditional product providers for so long and in doing so, take greater control of the value chain in which they play such an important part.

However, this can only happen effectively if they work together, pooling their expertise and assets for the benefit of their clients and their own businesses.

Paradigm has been working with partner firms for more than three years, helping them prepare for the change and ensuring they are all well on course to be ready come 2013. Paradigm, and many other firms like it, does not need the extra 12 months proposed by the TSC. In fact, the majority of those I have spoken to would feel let down if the delays proposed were introduced.

RDR is a fantastic opportunity for the advice market. Those who do not see it are simply fooling themselves and will pay the price when the day of reckoning finally arrives.

Paul Hogarth is founder of Paradigm Partners


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There are 42 comments at the moment, we would love to hear your opinion too.

  1. Paul, thousands of IFA’s are allready paying the price of handing their hard earned embeded value to people like you, Interesting that the networks have been very quiet on RDR, along with AIFA, because they are going to be the benificiaries of the destruction of small IFA’s.

  2. Paul

    I can see why you are content to see the £’ roll in of the back of RDR

    Smug !!

  3. should change their name to PARAGON

  4. Thanks Paul for reminding me why I didn’t join Paragon.

  5. Iain – I can understand why you may want to join Paragon but surely this article relates to Paradigm? Thanks for reminding me about why we need higher standards in the industry!

  6. Paul

    you need to go and sit on that chair of your and swivel!

    Agreed, smug!!

  7. To Paul McMillan,

    It is a little perturbing to have to see a self interested advertorial gracing the pages of MM. This isn’t Citywire you know.

  8. I agree the FSA is committed….or should be, but the argument repeatedly comes back to one question.

    Is the RDR route the most propitious means of achieving the desired outcomes? Outcomes which we all broadly support.

    If there is a mass murder do we ban guns or bullets?

    If it costs £5000 to purchase a car would we willingly buy a similar model for £500,000?

    If my next door neighbour misbehaves is it right that I should be arrested on suspicion?

  9. Thankyou Paul for those words of wisdom and congratulations maybe you should consider a job with the FSA.

  10. just one word comes to mind Paul – parasite!

  11. Paul you say: The FSA has shown itself to be completely committed to the initiative and the timescale and this is to be commended.

    However, there are 2.7 million (would be) ‘orphan’ clients who feel the FSA would be commended if they just listened:

    Otto Thoresen – CEO Aegon: “The RDR is only helping wealthy customers”

    AXA April 2009:”We will lobby the FSA to make sure the RDR does not mean less are able to access advice”

    David Cox – SuuqeaMarch 2009: “Two million clients could be left without an IFA after RDR – 40% could leave the industry”

    Shaun Crawford, head of insurance advisory at
    Ernst & Young, 26/06/09 The FSA’s Retail Distribution Review will have the following effect: Of a population of over 30,000 advisers, many industry commentators are expecting at least a third to leave by 2012.

    AVIVA Life marketing director David Barral has said the firm predicts by 2013 IFA numbers will fall to 10,000 in total as advisers fail to comply with RDR changes, leaving middle-market consumers unserviced. No surprise then that Aviva wants to grow its tied in-house channel to target 2.7 million ‘orphan’ clients whom were originally IFA clients. So much for consumer choice!

    Robin Stoakley, Head of Intermediary Business at Schroders said, “I do see up to 30 per cent of the IFA market leaving”.

    Figures provided by Matrix-Data Solutions (in June 2010) showed there were 32,000 advisers in 2008. However, this plunged to 30,198 in 2009 and currently stands at 28,714

    A study by Oxera during May 2010 showed that a quarter of advisory firms could leave the market.

    Stephen Gay – Aviva June 2009: “The regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes”

    FSCC January 2009: “Financial advice will be less widely available post RDR”

    Institute of Financial Services: “RDR will impair financial advice before improving it”

    Alasdair Buchanan Scottish Life November 2009: “Sales advice is a real cop out and extremely confusing to investors”

    Lord Lipsey: “Consumers in the middle (not high net worth or money guidance fodder) to be sold products by banks under the contradiction that is sales advice”

    Walter Merricks former Chief Ombudsman: “I think it would be unwise to count on the assumption that complaints from the retail investment world are suddenly going to go down as a result (of the RDR)”

    Deutsch Bank report August 2009: “Dwindling IFA numbers in the lead up to the implementation of the RDR will have a dramatic effect on the UK life industry. It will have a negative effect on new business volumes for insurers. There has been industry talk of 30% or even 50% of IFAs exiting the industry post 2012, which is not impossible.”
    Paul Selly HBOS: “Bancassurers set to benefit”

    Richard Howells Director Zurich LifeJune 2009: “The big question mark is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can really hang my hat on.”

    Martin Lewis Money Saving Expert June 2009: “There’s a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I do hope I’m wrong. I’m not convinced most people will want to pay for advice. The commission route has the advantage that you don’t pay a fee each and every time you want information; you can go without the worry of laying out cash. What I find most galling though is that bank-based advisers – those primarily responsible for PPI misselling, endowment mis-selling, investment mis-selling and generally poor advice all round are still to be allowed to be remunerated based on the number of sales.”

    Janet Walford OBE, Editor Money Management Sept 2009: “I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unitended consequences may well mean that this will be the result. This is especially the case when set alongside the myriad of other proposals that are costing some £430 million to set up, with ongoing fees of £40 million pa thereafter, a mind boggling amount of cash.

    Peter Hamilton barrister, Source: Money Management Oct 2009, Scrapping the FSA by Marie Jennings MBE: “The Financial Services and Markets Act does not permit the FSA to cancel an authorisation simply because the FSA has changed its views on what the appropriate qualifications should be….It is one thing to impose new rules for new entrants to the IFA profession, it is quite another thing to disqualify someone who is already qualified.”

    David Hazelton of Tax Incentivised Savings Association(TISA) 30/10/09: The RDR could be detrimental to consumers both in terms of higher product charges and an increase in the cost of advice, warns the Tax Incentivised Savings Association(TISA). Implementation costs for the RDR are being “seriously underestimated” and product charges will consequently have to be raised.

    Bankhall managing director David Golder 03/11/09: “We say write to the regulator, write to your MP. Do not let the FSA get away with some of the things that will lead to the widespread decimation of our industry.”

    Robert Kerr, head of retail distribution development at Scottish Widows says: The RDR could have the unintended consequence of “disenfranchising” the majority of consumers from financial advice. “Our key concern is the RDR proposals will act to drive advice upmarket, with financial advice becoming the preserve of the wealthy leaving mass-market consumers un-served,”

    Nigel Waterson when Shadow pensions minister : “While no-one can object to raising the standards of training and competence, should an emphasis on exams take precedence over on-the-job training and experience? Is the 2012 implementation date practicable given the extra qualifications and changes in systems that will be required to be in place?

    Richard Hobbs Director Lansons Regulatory Consulting 16/07/10: “I have to say, it (RDR) only just survived an executive committee meeting in March 2010 at the FSA. The FSA are not particularly proud of the RDR but it is a question of losing face, so I think they will carry on.”

    Nick Cann chief executive of IFP 30/09/10 said: “The FSA must develop a “catastrophe strategy” in case it reaches June 2012 and half of advisers are not yet meeting the RDR requirements.”

    Martin Lewis founder 21/10/10 has echoed warnings the RDR will reduce access to advice. Giving evidence to the Treasury select committee Lewis said: “By the nature of what I do, I deal with a wide spread of the public. I worry that if you ask people to pay for financial advice, they will not pay.”

    AIFA warned 16/11/10 that net fund sales would drop by £1.8 billion if the RDR caused a 10% drop in the IFA population. There is a danger that FSA’s RDR qualification requirements, and in particular the 2012 deadline imposed for achieving them, may result in a significant number of IFAs leaving the industry, thus decreasing consumer access to advice,’ said Aifa in a paper on regulatory reform:

    Sarah Thwaites, Director of Products and Services at the Financial Services Skills Council, November 2010 issued a statement saying: “The danger is that if too few existing advisers meet the new qualifications level, or the industry does not find it cost-effective to offer advice to the mass market, the very important aim of achieving good consumer outcomes may be lost.”
    On 02/12/10 Julie Patterson IMA director of authorised funds and tax says: IMA says RDR won’t cut charges. The Investment Management Association says it is “naive” to assume the FSA’s retail distribution review will drive down overall charges. As part of the FSA’s recent platform consultation paper, the regulator said it would “be surprised” if annual management charges were maintained at current levels and suggested competition could lower overall costs. But IMA director of authorised funds and tax Julie Patterson says: “There is a slight naivety to this assumption. What the FSA does not recognise is this does not mean the cost for investors will go down. Yes, it will look as though the returns are better but the overall costs will go up. “There are tax effects – if the charge goes down, then the return on the fund is better, so there is more income to come on the fund. If there is more income, you will get a tax hit. Out of that taxed income, you will have to pay the adviser and those charges will be charged VAT at 20 per cent.” She adds that “other parties down the chain”, including platforms, may increase charges to cope with the burden of the RDR.

    On 06/01/11 Richard Hobbs director Lansons Public Affairs and Regulatory says the FSA’s cost-benefit analysis of the RDR is “dubious” as it does not measure the detriment. He says: “What Sants’ letter does not attempt to measure is the detriment that arises from the savings gap and the protection gap. We also do not know how much extra detriment will be caused by the amount of advice declining, but we know that it exists. When you add that into the equation, the RDR cost-benefit analysis becomes a much more dubious proposition.”

    On 27/01/11 Ernst & Young has compiled a paper on the impact of the RDR. It says banks would have to charge £200 an hour for advice just to recover their costs. Director of financial services (insurance) Malcolm Kerr says: “I am not convinced that the IFA brand is sufficiently well known among consumers to justify the additional risk and cost of the independent route.”

    03/02/2011: Sarah Thwaites, director for skills and development for the FSSC, said there has not been enough time between publishing qualifications and the 2012 RDR deadline, and added there should be transitional arrangements. The first qualifications did not start coming out until later in 2010 and the final list of approved qualifications are just coming out now. What the FSA has done is start the clock from when it announced the no-regrets policy, but if you have waited to do the exam route you have not had much time. The FSA has failed to take the FSSC’s views on board. The FSA reaction was to write to the FSSC and warn them not to divulge information to the press.

    26/02/11 Paul Farrow Daily Telegraph: “Driving Us To The Banks For Advice Won’t Work”, he said, “RDR is meant to mean that customers are treated fairly. I don’t see it. Any initiative that drives more consumers to the banks will simply lead to more PBA (poor bank advice).”

    4th March 2010 Peter Smith FSA’s then Head of Investment Policy speaking at a Chartered Institute for Securities and Investment Private Wealth Management Conference in London, speaking about the potential for consumers rejecting the big idea about adviser charging confessed, “If consumers still do not want to engage with it then we probably will have to do something else.”

    24/03/11 Friends Provident: Announced that the retail distribution review (RDR) has meant it is no longer viable to market or develop new investment products. In its interim results Friends Provident said the RDR meant that it would not actively market investment products and the insurer has concluded that the costs required to develop an RDR-compliant investment product and the expected margins on the products would not generate adequate returns for shareholders.

    31/05/11 Paul Kennedy head of trusts and tax planning at Fidelity International said: There is a risk that investors will end up paying more tax on their investments which, coupled with the monster that is VAT, would leave them out of pocket.
    29/07/11 AXA Managing director of UK distributors David Thompson warns product development may suffer in the run-up to the RDR as providers concentrate on changing their systems to facilitate adviser charging.

  12. Once the RDR comes in we need some stability in regulation so that we can plan and invest in our businesses.

    I would have thought the FSA would jump at the chance to delay the RDR. The non-event of the platform paper, the mess that is VAT etc means the whole thing needs re-thinking.

    We cannot afford RDR2 in a couple of years – that will finish everyone.

    RDR must be right first time and the FSA should delay it until it is spot on.

  13. While the RDR have been with us some time it was expected to be kicked into the long grass but it hasn’t. This has led many to deliberate on the required changes – so the step change has become steeper because of the diminishing time scale to take action .However if you intend to be around post RDR or have yet to decide let me offer a couple of insights.Rubbish service will be a thing of the past. Providers will be competing for your business like never before. Those that can’t will wither on the vine or make a last ditch attempt at going direct (Doomed to failure) You will only work with clients who appreciate you (and pay you) the rest can …..go speak to their bank. The inevitablr reduction in IFA numbers will alter the consumer to IFA ratio in the IFA’s favoour. Now would NOT be a good time to sack your IFA. As for the concern about loss of access to advice by consumers there always has to be a loser when change occurs but this time it is NOT the IFA’. Think about it!!

  14. There certainly are “fantastic opportunities” arising out of RDR. Not the least of them is for fatuous articles, promoting organisations that perceive benefit for themselves, appearing in the trade press under the guise of reactionary opinion.

    Come back Nic, most is forgiven

  15. i think paragon are quite virtuous

  16. Just a plug for his firm if you ask me and does little to solve the issues we have.

  17. Who is this tool (of the FSA)?

    We’ve already started telling our clients what’s coming. Guess what? WITHOUT EXCEPTION they have all said they will never pay for advice and would rather do it themselves. And that is clients ranging from £25k administrators to multi-millionaires.

    Our new business model – free advice. No VAT and more importantly no liability (if no money changes hands – no liability can exist). We WILL be charging transaction fees surprisingly similar to commission levels and, because its for a transaction and not advice, no liability again!

    Looks like nobody’s thought this one through at the FSA, ABI , HMRC CII etc

  18. I understand that standards are always meant to be met and improved upon. That is Life. . That is what change brings.

    I can see both sides of the equation however I do pose the question that if IFA’s do not meet the requirements within the proposed deadline is it not an infringment on their Human Rights to remove the right to earn a living?

    The Human Rights Act says that you have the right to Protection of Property. The skills and goodwill earned during the years by those IFAs are argueably, being illegally removed from them overnight, by Government Authorities, which contravenes the very essence of the HUman Rights Protection of Property Concept. . .

    I understand that it is illegal to prevent a person from carrying out their trade in legal covernants. Would

    How can any professional be competent on the 31st of December 2012, been seen and demonstrated as competent for many years to then wake up after a very self destructive New Years Eve, be no longer competent if the new rules are not met?

  19. Bert Poppins. Sarcasm is surely the lowest form of wit. But you knew that already didn’t you having such exacting standards, and a box to stand on so you can tower above your peers.

  20. Thanks, Paul, (representing Paradigm Partners, not Paragon).
    Whilst I cannot argue against the RDR requirements for professional qualifications (lets face it, there has been plenty of advance notice for advisers to achieve L4) I feel the rest of the RDR agenda is superfluous and probably even detrimental to customers.
    Good luck to all the professional advisers who remain in the brave new world.

  21. I suppose he does have a point or two and he does sincerely believe that it all works to his advantage. However his period of hay making will be terribly short lived so I hope he stashes enough bunce away before the EU catches up, or he gets a job with the regulator of the day, whatever it may then be called, wherever it is based.

    The RDR still misses the targets.

  22. @anon – not sure I have especially high standards although your comments would hold more water if you actually used your name. I do like your use of irony though.

    Whilst don’t entirely agree with Paul’s total view of the world I’m struggling to see the article as self promoting? If this is marketing then the rest must be shocking in the industry.

    Of course we could all hang around moaning about unfair life is or, like in most walks of life, just get on with it. I need to work after 2012 and therefore I need to adjust – my family will not appreciate claims that my human rights are being breached (a claim I find distasteful given the true breaches occurring all over the world).

    Grow up.

  23. Extract from the Paradigm website::

    “As a directly authorised firm you keep all of your own agencies when you join us. We simply instruct the Product Providers to uplift your commission terms to our enhanced rates”
    Does that proposition fully embrace the ethos and
    implications of RDR.

    Extract from the above article “Now more than ever advisers have the opportunity to alter the relationships they have had with traditional product providers for so long”?

    Paul – are you sure you don’t need a bit more time to move from the past to the future?

  24. Anonymous | @ 3 Aug 2011 8:40 pm wrote

    Our new business model – free advice. No VAT and more importantly no liability (if no money changes hands – no liability can exist). We WILL be charging transaction fees surprisingly similar to commission levels and, because its for a transaction and not advice, no liability again!

    Can you explain your conclusion of NO LIABILTY ?? – Surely FREE ADVICE is still advice and therefore advice at any or no cost is still liable ? — or are you offering a transaction service with no advice ??!!

  25. Is it me?……………………..Who benefits??…Clients …NO!…IFAs….NO!….Oh yes….the FSA,CII,IFS and the larger IFA firms that have the resources to support RDR.Anyone who things that once RDR is in place that is it for a while without further exams/massive change are sadly mistaken.

    RDR has some good points.The idea to gain more qualifications is a good thing.Does it really need a deadline?? Surely a more robost CPD/gap fill will do?.

    The idea that clients can opt in and out for service is a good thing along with having a customer charter.

    RDR is doing one thing and one thing only….generating an additional income stream to the FSA,IFS,CII and the so called experts that a pro RDR!…I cannot believe this will be implemented on time and right.

  26. Sounds like a cunning plan, reinvent the Bankhall wheel and then put the turkey suit on.

  27. Paul McMillan thank you for making me smile, albeit ironically.

  28. James Harrison-Smith 4th August 2011 at 3:51 pm

    As a consumer am I missing the point about the RDR? The RDR is far from perfect but surely the key aspects are to improve quality of advice and create greater transparency? This has to be good for consumers (isn’t it better that consumers have access to 10,000 well qualified and transparent IFAs rather than 13,000 IFAs potentially operating non-transparently and with no minimum standard?!)

    Most of these contributors seem to think the RDR should be about making their life easier, when surely it should be aiming to improve standards for consumers – if the above contributors want to criticise Mr Hogarth for identifying the impending issues and building a business to survive in the new world, surely that is predominantly jealousy?!

    In a nutshell isn’t the RDR about a few key principles:

    • Uniformed qualifications – this doesn’t itself guarantee quality of advice but does give consumers the assurance that at least their adviser has a uniformed minimum standard (with so many qualifications and acronyms on business cards, how does a consumer currently assess if their adviser is suitably qualified?!)
    • Increased scrutiny and reporting – has to be good for consumers that advisers are being monitored more closely

    • Transparency of fees – this has to be a good thing from a consumer’s perspective as surely the consumer should know the value of the advice they are getting and be able to shop around if they wish (fees aren’t the be all and end all when shopping around but without clear value attached to a service it is impossible to shop around)

    • Nil commission – commission from a provider is a natural conflict of interest (unless uniformed – which would never happen) so clients should benefit from being advised on a product which is right for them rather than a product which yields the greatest commission

    • Capital adequacy – I can see why some advisers are concerned about this, but again surely this is a positive from a consumer’s point of view? This is already necessary for other professions and will become an increasing issue for other sectors as well

    The only thing that keeps striking me is that all of the complaining must be from advisers who aren’t ready and stand to lose out. They should spend more time creating a sustainable and successful business model rather than spending their time complaining about the inevitable. If I spoke to an IFA who argued against the above fundamentals of the RDR I certainly wouldn’t want to seek their advice and would instead seek an IFA who embraced the fundamentals of transparent, impartial and quality advice.

    On a similar note, surely the product providers quoted by various contributors are concerned as RDR is detrimental to their business in the short term (as I presume they are having to reinvent the way they work) so of course will have the opposite view to Mr Hogarth who appears to have built a business ready for the new world.

    The RDR has been around for a number of years now so why delay? If anybody runs out of time, that’s surely their own fault as they haven’t prepared in time – surely there’s no need for the petty vitriol aimed at Mr Hogarth.

  29. I wish I had a hyphen in my name my Lord.


  30. Crikey, what a pointless post from someone who has a vested interest in RDR……..

    It’s a bit like me saying I agree with Guy Fawkes night when I am the MD of a fireworks manufacturer.

  31. Antonio

    English case law is the basis for the statement. Basically if a service is given for free no liability exists otherwise any “adviser” in the pub, be it for plumbing, bricklaying or financial services, would in law be liable.

    There are several well documented case law instances and, being English law where precedent has a lot of credence, that would be taken into account in coming up with any ruling.

    Why do you think the MAS and journalists etc can give “advice” and there’s no comeback (unless your phone is hacked obviously). Think about the buy to let property boom. Does the mean that nice lady on Channel 4 is liable when it goes belly up?

  32. Just a quick note – I have read all these posts and in some ways I think that Hogarth has just been verbally abused for the sake of it. However, some comments are intelligent and in no way vitriolic.

    Mr Hogarth is not a qualified industry professional and is about making money, normally on the back of selling something to a life company/large organization and does have a habit of treating the IFA community like pawns.

    The Nucleus example really goes to prove a point here, why load a basic platform with 15bps? What does this pay for, if not to make profit for Hogarth. How does this help the consumer? If 15bps paid for some tangible benefit then no problem and a ‘clean’ profit is well deserved. However, loading something for no reason is completely against The RDR and effectively ‘bundled’ and ‘packaged’.

    There is a huge irony here and I would say that transparency comes in many forms and by the measure of comments on this forum I would say that IFA’s are now starting to see the wood for the trees.

  33. @James Harrison-Smith

    Qualifications – Level 4 is a joke. Too demanding and unneccesary for the vast bulk of Sales made and yet not adequate to allow an adviser to be considered a professional. level 6 would be the starting point for those who really offer complex advice. Level 4 will simply allow some advisers to con the public into thinking that they are Qualified and to charge more.

    Transparency of fees – Sounds good but if it leads to higher charges overall ( and so far all the evidence says that it has ) then as an investor I would prefer to pay less and no know how the cost was calculated

    Nil Commission. Anything from a provider is a conflict of interest. True and Proper Independent Advisers should not be allowed to have ANY contact with providers. The Platforms that will not allow direct clients are only supporting this conflict. If I have to go thru and adviser to get to a platform then the conflcit you describe simply continues.

    1% pa taken as a “fee” from my funds is worse then 0.5% pa taken as a commission from my fund.

    Capital Adequacy. Agreed. I would not take Investment advice from anyone who didn’t have large personal funds invested and who hadn’t lost large amounts in the past but would be quite happy to discuss Critical iIlness cover with an adviser with say 25 years experience but no qualifications whatsoever.

    Anyone who thinks that the FS world will be a better place post RDR is naive at best or has a vested interest – it will be different but not better. Possibly worse, certainly more expensive for investors.

  34. I understand the conflict of interest argument with providers effectively paying commission to advisers to distribute their products.

    However, post RDR, it would be wrong if providers are, effectively, able to distribute their products for free and still apply product charges as if nothing has changed. Initial charges and AMCs must be reduced by the full commission rates now payable in order that the consumer doesn’t finish up ‘paying twice’ for advice.

    I believe many investment houses, and certainly the greedy life companies, will seek to introduce new charging structures which only partially remove the commission element previously paid.

    The end result (and I’ll lay money on it) is that product charges will come down a little bit and adviser charges will increase (beyond the commission rates now received) to help cover the cost of operating under RDR, and the customer will foot the bill.

    Well done FSA.

  35. When you read a “consumers” view, such as those expressed by Mr Harrison-Smith, then it leaves little room for further argument. Or does it?

    Of course, the views expressed from most consumers would be similar. My own firm has conducted research, and we have taken the steps to already be “RDR ready”, so according to many contributors I, too, must be smug. We already have service propositions, charge fees, act transparently, are qualified, win awards etc. We are what the FSA thinks consumers want. They could bring RDR in tomorrow and it would benefit my firm, along with about 20-25% of other firms.

    However, despite this, I would argue that the FSA have got it wrong! You see, what Mr Harrison-Smith does not recognise, nor do most consumers, is that financial advice is not cheap – we have many fees and costs that other business types do not have. We retain liabilities for years, that are then viewed through retrospective eyes, and therefore we have to maintain a “capital adequacy” will in excess of any laid down requirement, and of course big PII costs.

    This means that, although my business has positioned itself for “post-RDR” it also means that my IFA’s and myself are not longer available to any consumer with less than £80,000 to invest. There is no cross-subsidising anymore.

    I have expressed my concerns to Janet Walford and others and I believe that we are about to enter a world where “IFA” will be term associated with advice offered exclusively to wealthy people.

    Clearly, no doubt, there will be contributors who are writing in here due to self-interest, and in some cases because they want an easy life, and in some cases because they are jealous. For these people (advisers) I have no sympathy – when people start writing about Human Rights, it reminds me of how skewed our view of the world has become if they associate it with people in my industry! My sympathy is reserved for consumers who are not wealthy and are about to have their access to IFA’s removed. This surely cannot be good for the majority of consumers and therefore goes against what the FSA were trying to do.

    Does RDR need to change – in some parts yes. Those parts have to be the ones that allow for “poorer” consumers to continue to be able to pay for obtaining financial advice, and in particular therefore, the rules banning factoring need to be addressed.

    Do my company have a solution – maybe, but it does not involve face to face advice, and I just wonder if Mr Harrison-Smith really understood the full consequences of RDR, whether he would be so positive?

  36. It’s easy to throw rocks at Hogarth because he’s been clever enough to adapt a business model which makes money and provides services to otherwise helpless IFAs who haven’t a clue and shouldn’t be allowed out on their own.
    The REAL villains are the Regulators and the politicians and of course ,the spineless Life Office chiefs who, over the years, have allowed this once great industry to disintegrate into a shambles,hamstrung with stupid rules and costs which help no one except the overpaid parasites at the FSA. Someone on here called Hogarth a ‘parasite’. I expect the same twit was saying the same about the life companies and now there are hardly any left. My dad went to try and get some financial advice in 2 IFAs and one bank and he said he felt suicidal with the mountains of tosh he had to go through to even start a conversation with anyone about anything meaningful. The obstacles in place to even effect a cash ISA are unbelievable.
    This article by Hogarth is smug and he is a clever politician , but don’t blame him for trying to earn a living from the chaos caused by the nincompoops who run everything.

  37. Typical network man. Makes his money off the backs of others and getting as far up the FSA’s backside as possible.


  38. “Nick | 3 Aug 2011 9:57 pm

    How can any professional be competent on the 31st of December 2012, been seen and demonstrated as competent for many years to then wake up after a very self destructive New Years Eve, be no longer competent if the new rules are not met?”

    On the basis of the so called advice I have seen over the last several years, it’s clear, in some areas, ‘professionalism never existed’ in the first place – it’s just they have been allowed to get away with it for various reasons.

    James Harrison-Smith – Good post!

    I think the fairest thing to sayon Commission v Fee’s – if we as the clients advisers are able to give advice and receive commission which covers our costs – why do people think they are unable to offer a Fee basis (which is explicilty deducted from the plan) and again cover their costs.

    I am guessing the good old ‘smoke and mirrors’ on Charges/Commission is perceived to be good value for clients?

  39. The “consumer” writes: “Nil commission – commission from a provider is a natural conflict of interest (unless uniformed – which would never happen) so clients should benefit from being advised on a product which is right for them rather than a product which yields the greatest commission”
    “Commission” is a payment by a product provider to an IFA for marketing and distributing the product. Surely you do not want to pay for this! But post RDR, when IFAs have disappeared, do you honestly believe that companies will market and distribute their products free of charge? Marketing and distributing costs money. The whole problem has arisen because product providers have been happy to disguise this cost as a “cost of advice” in product illustrations. They have been allowed to get away with this, (in much the same way as product providers have escaped responsibility from so-called “endowment miselling”). This catastrophic mistake was made back in the 90s when commission was first disclosed on product illustrations.

  40. I can understand that Pardigm feel confident that they are in a satisfactory position regarding the RDR deadline but I dont understanfd why they should comment ‘In fact, the majority of those I have spoken to would feel let down if the delays proposed were introduced.’ Surely if their position is that good the deadline timescale is irrelevant? This makes me side with another readers comment that Paradigm have written this more as an advert for Paradigm than a serious comment on the RDR deadline.

  41. Paul Hogarth
    What a pompous wind-bag! Sounds like an FSA aparachik.

    The highland games season starts in Scotland about now. Why not do us all a favour and get up there’ I’m sure there’s one particular event you will excel in.

  42. Simon. Your reply is long but spot on.
    Perhaps the exodus of IFA’s will form their own companies post RDR and offer a pre Ombusman service for all those offered tied advice which fail to mention other providers products.
    Just what exactly will clients get for their money post RDR? it certaincy wont be service, and very much doubt it will be performance either.
    Maybe the less afluent clients should invest in a decent Divan bed in which to store their under the bed assets. Just make sure you have a decent theft contents policy.

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