The RDR may have been painful for advisers but it is starting to pay dividends by boosting advisers’ credibility, according to Mike Seddon, managing director of IFA firm Grayside Financial Services and chairman of the Nucleus IFA advisory board.
“The RDR has been a good thing, although the run-up to it was painful in that advisers have had to take exams and faced the threat of increased capital adequacy requirements,” says Seddon.
“There has been lots to contend with but we had a long-lead in, so it wasn’t sprung on us. I think the advice industry has gained credibility among clients and professional partners.”
Since the RDR, there has been a lot more focus on business processes and ensuring adviser businesses remain compliant. One area where this has an impact is the use of platforms within advice firms. The need for greater efficiency has forced firms to embed more and more technology in their business processes, but as platforms become even more critical in the distribution chain, the FCA has become more vigilant over their use.
Since April, greater responsibility has fallen on advice firms to ensure the platforms they use are compliant with the FCA’s policy statement XPS 13/1, which applies the principles of the RDR to platform providers.
However, Seddon believes the new requirements are no more of a burden on advisers than any other of the due diligence hoops they have to jump through – and he thinks advisers should already be doing in-depth research on the platforms they choose.
He says: “Due diligence at the adviser level has been around a long time; it’s in place for everything from investment selection and the back office system suppliers we use, down to who we are banking with. In respect of wraps and platforms, it’s a must because you are putting client money through that system.”
Seddon is convinced that advice firms will learn a lot from the findings of the third stage of the FCA’s thematic review, which will look at due dilligence for retail investment advice.
“The findings from the FCA thematic review will be interesting and a lot of firms will learn a great deal about good and bad practice. There are plenty of resources out there to assist advisers with due diligence of platforms, such as The Platforum and The Lang Cat.”
In Seddon’s view the due diligence requirements are a good thing for clients, especially as post-RDR the industry is focused on the need to provide a service to clients that justifies ongoing fees. One area he would particularly like to see clarity on is the issue of rebates.
Under the FCA’s new rules, platforms must charge on an unbundled basis and pass all rebates back to consumers on new business. Seddon says: “Rebates are causing confusion as there is no clear cut route for platforms. The move towards clean shares is gaining momentum – but clean share classes bring their own problems. They may appear to be the best option for clients, but advisers need to look under the bonnet of the cost.”
Seddon sees the skills needed by advisers today as vastly different to those needed when he joined the industry in the mid-1980s.
“If you go back to when I joined the industry it was all about selling but the industry is completely different now, it’s unrecognisable. It’s about customer service, time management, technology and people skills. We still have to close a deal and reason with clients, so you still need certain elements of selling, but it is not a selling job now.”
Seddon got his first taste of financial services at the age of 17 in underwriting with Prudential. At 18, he was working as a district agent. “I was ‘the man on the bike from the Pru’. It was fantastic. It was 100 per cent customer facing, with not much paperwork,” says Seddon.
Seddon became an IFA at National Counties Building Society in 1990 before moving to the IFA arm of Mortgage Trust and in 2000 he was appointed managing director of that firm, which had become Britannic Money Investment Services. Three years later Seddon learnt that the firm was relocating to Birmingham but wanted to stay in Epsom, Surrey, so he joined Grayside.
Seddon was elected chairman of the Nucleus IFA advisory board last August. The role involves representing the views of Nucleus’s users and adviser shareholders to the company management.
“It’s too early to see any difference that I’ve made as chairman as it takes at least three meetings to get your feet under the table and we only meet quarterly. I’m enjoying it, although it’s been a steep learning curve,” he says. “I’m keen to put more information out to the wider shareholder community at Nucleus. I don’t want them to think that it’s a closed shop because it isn’t.”
Seddon says post-RDR, Grayside’s advisers are more mindful of compliance and regulatory pressures. “A lot of pressure comes from a complaints culture fuelled by ambulance chasers. They have had their fill of PPI and are now turning their attention to the advice sector. As we move forward, our advisers will have less time in front of clients. Technology helps but you still have to take time to install that technology, learn it and be a competent user. That is all well and good for advisers in their mid 20s but if an adviser has been in the industry for 30 years it’s more of a challenge.”
Seddon says he is keen for his business not to rest on its laurels after having met the RDR standards.
In 2012, Seddon achieved chartered status and says that while this was the highlight of his career to date, it was also an important milestone for the business.
“Trying to run a business and taking time out to study for exams is challenging. But its bigger than me as gaining chartered status as an individual means Grayside qualifies as well. The number of chartered firms is growing but it is not the norm and it still separates us from the rest of the crowd. It demonstrates that we take things seriously and that we are in it for the long term.”
What is the best bit of advice you’ve received in your career?
You’ve got to be prepared to take a risk in life.
What is keeping you awake at night?
My two kids coming home after a night out. Financial services don’t keep me awake at night.
What is the most significant impact on financial advice in the past year?
The ongoing impact of the RDR.
If I was put in charge of the FCA for a day I would…
Ensure the key decision makers understand and appreciate the way advisers operate in the market. In general, the advice given to consumers is excellent.
Any advice for new advisers?
Take your time in learning skills and working your way up from the bottom; treat every client as if they are your only client and be prepared to keep on learning as you never know everything.
2013-present: Chairman, Nucleus IFA Advisory Board
2003-present: Managing director, Grayside Financal Services
1997-2003: Managing director/IFA, Britannic Money Investment Services
1990-1997: Senior IFA consultant, National Counties Building Society
1988-1990: Broker consultant, Equity & Law
1986-1998: District agent, Prudental