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Push for ‘basic advice plus’ regime with commission and lower quals

A “basic advice plus” regime allowing commission payments and requiring QCF level three qualifications has been proposed by an industry group including representatives from the Association of British Insurers and Association of Mortgage Intermediaries.

The group, led by industry consultant Peter Williams (pictured) and also including staff from JP Morgan and Lloyds Banking Group, was commissioned by the annual Gleneagles industry conference in 2011 and presented its report at this year’s conference, which took place earlier this month.

The report calls for QCF level three advisers to offer basic protection products, cash and equity Isas, stakeholder pensions and advice on purchasing an annuity subject to the size of the pension fund. Advisers would be paid by commission and products would be designed by the industry and approved by the regulator.

The working group says the FSA’s insistence that advisers delivering simplified advice must be qualified to QCF level four is “educational overkill” which “prices out” the target market.

Williams says: “There is a massive advice gap opening up and we are trying to find a way to plug it. We totally support the idea of the RDR, but next year we will be in a position to ask whether a new structure is needed to cater to any identified gaps. We should be starting this debate now.”

Yellowtail Financial Planning managing director Dennis Hall says: “It is likely the Financial Conduct Authority will need to look at this and question why it is measuring all advisers by the same yardstick when clients’ needs are completely different.”


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There are 16 comments at the moment, we would love to hear your opinion too.

  1. This sounds substantially like the regime that Adviser Alliance and the iFADU was promoting back in 2007.

    Why didn’t these luminaries make the appropriate noises then?

  2. This would be really really funny if it was not so bloody sad !!!!!!!!!

    The fact that it was the result of a speech at of all places GLENEAGLES (where the infamous calum mccarthy speech started the whole sorry RDR saga in the first place) makes it even more funny !!!


    I dispair

  3. So, what is proposed is that RDR should not apply to small clients!! A less professional/knowledgable adviser can continue to receive commission on a restricted product range, including ‘small’ annuities. This is a knee-jerk reaction as they finally are realising that the biggest consequence of the RDR will be a massive reduction in the amount saved by the man in the street. I usually have every respect for Peter Williams, but this is just totally wrong.

  4. It seems to have finally filtered through to the product providers that with the 30% cull of advisers, a trend towards tied and multi-tied as well as the continuing concerted afforts by the FSA to destroy adviser/consumer interaction, they are in danger of disappearing.

    Whilst the interests of providers are often at odds with fair play and consumer enfranchisement this is one area where I believe we should all concur.

  5. “The proposed solution of CII level 4 for all could hardly be more inappropriate. It is not demanding enough for Advisers and yet it is unnecessarily complex for Sales Advisers.”

    I wrote the above to the Treasury Select Committee in 2008. John McFall put this point to the FSA in committee and received no real answer.

    I would certainly not wish to take complex advice from someone with less than Q level 6 but would be quite happy to buy a product regulated ISA from someone with ONLY level 3

    One size does NOT fit all and eventually some sort of scheme of the type proposed will be necessary to undo the damage that RDR will cause.

  6. Everyone is entitled to good advice – and the breadth of choice for ‘smaller’ clients should be the same as that for ‘larger’ clients.

    Anyone who has a genuine interest in providing suitable advice should be willing and able to reach Level 4. If not, then the industry will be better off without them.

    If there is one good thing to come out of RDR it is the fact that all advisers will have to prove a basic level of knowledge. In what other line of work can you earn a good living with no qualifications beyound an 11-plus standard of understanding ?

  7. @greydefector, you are spot on, but those of us working for product provideres have been saying this throughout, and this month we have seen significant RDR related redundancies from several providers.

    Attempts to do simplified advice donlt work because the FSA culture is to demand a higher advice standard that can be achieved for the price we or the adviser will be allowed to charge.

  8. First let me say that I agree with the principles of RDR, but I don’t agree with all of the execution of its implementation.

    Raising standards, increasing transparency and moving more of the focus on to the client is all significant steps forward. However, you only need to browse through the many articles from MM to discover that many many IFA/advice firms are moving up market towards wealth. There will also be less advisers, and the recent research papers on the acceptance of an advice charge is that it is going to be a ‘tough sell’ at the lower end of client needs.

    Straight forward needs require a simple solution. If RDR were applied to the legal profession, It would be a bit like asking a barrister to write a simple will or house conveyance. In other words OTT

    The FSA have not helped themselves with simplified advice. They tried to promote a simple process, that they accept may be needed, but have crippled it by applying the full RDR requirements. Just look at how many people are planning to deliver simplified advice. That will tell you how well many think it will work…virtually none!

    If you accept that many people have basic needs and want a service that is simple but has very clear borders (call them restrictions if you want) around suitability, with a clear inclusive (capped?) charges, then a less experienced/qualified individual could deliver that. In my opinion though it should always work alongside an IFA for when the level of wealth or complexity of needs exceeds the limitations of the service/product.

    You would also solve the problem of where do we get the future advisers from, as currently which firms recruit an inexperienced new start and train them up to a full RDR proof IFA? A more basic service would be an excellent development environment.

    My suspicion though is that the FSA/FCA will stick with the current simplified advice rules they have developed until there is such an obvious advice gap that it becomes impossible for them to resist the inevitable rules change that many of us know is required.

  9. The whole excuse for RDR was to promote greater professionalism in advisers through higher knowledge acquisition via exams, thus increasing consumer confidence in the industry and to provide better consumer outcomes. Opinions in the industry differ as to whether this will actually be achieved.

    This proposal suggested for the sole purpose of self interested parties, could never meet the consumers needs for “advice” on financial planning and futhermore would add a degree of confusion in the consumers minds as to exactly what they are paying for (commission still comes out of their pockets.)

    I don’t particularly like what the FSA has imposed on us in such a short time scale, detest the commission ban for its lack of consumer choice, a system of adviser remuneration which was not broken, just needed tweeking and revising so that providers could not dominate the market and have struggled to get to level 4 (nearly there) as a 63 yr old non academic but perfectly competent adviser, but this suggestion flies in the face of common sense, especially as the EU is also banning commission.

    Too late to do anything about this now, the FSA would have to revise the whole of the RDR and they are never going to do that.

    As for level 4 being “educational overkill” what a load of nonsense, I am currently assisting a client who got stitched up with inappropriate life and CI arrangements which due to a seperation and subsequent death by suicide of her husband recently left her unprotected as the two individual policies the bank wrote on them instead of a joint life first event policy for mortgage protection, meant that on seperation when he cancelled his policy, she, who took over the mortgage was left without any method of paying it off after his death.

    No doubt the people suggesting the level 4 is too high a qualification (industry consultant and product / fund provider) are a little out of touch with reality.

    Simply put, this is what it is, we are where we are and we just need to get on with it and serve our clients to the best of our abilities.

    On reflection after many angst ridden internal debates, the commission ban applying to investments is not as bad as it seems, however advisers proposition to clients needs to demonstrate that if you are charging a percentage fee, it truly reflects the value of your services.

    3% of a £10,000 investment involves the same amount of compliance procedures and potential product suitability proofs as a £100,000 investment. It is down to us to ensure our fees reflect the costs of work done in time and expertise and our profit margins to sustain the business for the future.

    As this guy appears not to be working at the coal face, so to speak, he can come out with any garbage he wants to and still get paid.

  10. @ Bill Wells – can you really afford to sell/advise a client who has only £100 pm to invest ? and be totally compliant and not overcharge your client ?

    I would be quite happy to see £100 pm ISA sales from a list of regulated products with a small commission but without the full monty fact find, research, higher qualifications …..

    I agree this would not be as good as Q level 6 £150 plus ph in depth Financial advice but it would be affordable and it would work

  11. Hello Playmates!

    Let’s see now. It’s been a long time since I was at uni but I seem to remember something my economics professor said through a haze of stale Newcastle Brown and Gauloises:…

    (Government + Control of Business) = Disaster

    How many times do people need to be told that government cannot (and has never) done anything useful. Only We The People can do that. But Brown and his cronies allowed the FSA to operate beyond the control of parliament and the RDR is the cock-up they have now presented the country with.

    Would the last one out please turn off the lights.

    Love and kisses

    Larrykins xxxx

  12. Fees or commission from providers works as do incentive schemes to distribute products but the problem lies within the hands of those who don’t adhere to ‘best advice’ principles. QCF4 is overkill as I’m no better an adviser than I was before but I now have so much irrelevant knowledge to impart. Dishonesty exists amongst many very qualified people i.e. lawyers,accountants, politicians and bankers who misappropriate funds on a grand scale. RDR a sledgehammer to miss a nut!

  13. It is interesting that this story comes out on the same day as Lloyds annouced the closure of its financial planning service to those with less than £100k.

    I am no fan of ban advice, but it does go to illustrate the widening gap in access to advice.

  14. If the FSA were to give this now it would pretty much undermine the whole of RDR. Whilst that might be a good thing it’s unlike that the FSA will think so.

  15. Are the ABI supporting this so that it becomes economically viable for their members to have tied and direct salesforces?

    And why should a level 3 adviser be able to take commission and a Level 4 adviser isnt – surely it should be the other way around as a reward for increased knowledge the opportunity to offer clients the choice of how they pay?

  16. They have it. It’s called CEFA. After all the expense, stress disruption caused to people’s lives to get QCF4 and the redundanies caused by this these people have a B****Y cheek.

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