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RDR unlikely to see more people take advice

Much of the debate over RDR outcomes is whether more people will get access to advice. The proposals, as they exist, do not make this likely.

As organisations grapple with the evolving requirements, more businesses will be in a position to offer advice and technology will continue to develop to enable greater engagement.

The challenge is how we educate and engage with the consumer so they can be comfortable and able to trust the process to deliver a service that is relevant and appropriate for them and their needs.

The IFP’s national consumer awareness campaign Financial Planning Week (November 22-28) is gaining greater interest than ever this year. The consumer survey commissioned with NS&I and YouGov has thrown up some startling and worrying facts. Given this is the third year that Financial Planning Week has run in the UK, trends are evolving that need to be dealt with.

As Financial Planning Week launches, the Financial Planning Standard Board has released a white paper outlining the organisation’s position on regulation and oversight of the financial planning profession. The IFP is the UK affiliate of the FPSB.

The FPSB argues that professional financial planning bodies have a key role to play in regulation and oversight of financial planning and supp-orting governments to achieve their regulatory goals by relying on global best practices for financial planning regulation and certification. The paper suggests four tenets for effective financial planning oversight, including protecting the term “financial planner”, holding financial planners to a fiduciary standard of care, covering the use of financial planningrelated titles, and that oversight of financial planners should be undertaken by a professional financial planning body.

The IFP has long argued that more needs to be done to differentiate the discipline and delivery of financial planning. More direct engagement is needed with the consumer, as well as an education programme. Providers and services need to focus on consumer needs and engage with them to create a “wow” factor.

All planning needs to begin with analysis to work through what the future journey looks like and what is important, establishing a critical path and priorities.

Many people need to understand and manage their debt. Everyone needs to understand their budgets. The personal balance sheet is also important for a clear understanding of what they own and what they owe.

Don’t forget about protection. Making sure clients’ lives are not derailed financially by unforeseen circumstances is vital.

Having dealt with the other priorities, saving for the future is essential for goals and dreams to be achieved. Retirement provision should be at the top of everybody’s lists alongside other big lifetime events. Putting the plans into action is the start but regular reviews will ensure future success.

Clients who are already working with financial planners have identified they need professional help. They either have complex needs or do not have the time, knowledge or skill to take care of things themselves and are prepared to pay for this service. They understand what they are getting and value the service as it provides a clear direction for the future.

Nick Cann is chief executive of the Institute of Financial Planning


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There are 6 comments at the moment, we would love to hear your opinion too.

  1. its not the consumer that needs educating , its the FSA!

  2. First sensible thing I have seen this man say after supporting the Retail Destruction Review all this time

  3. I agree with the first comment 100%.

    The article mentions the single most important element the client or a better word consumer.

    If they had conducted a retail impact study of the consumer and the market first, the same way a supermarket has to during planning permission for a new store, the typical target consumer, their affordability and habits would be described and backed up with hard facts.

    Any plan of action has to be within the affordability of those consumers, that means the service AND the limits of consumer protection to match that cost.

    Then there is the target consumer’s ability to digest information and the time they are willing to spend on that service.

    This provides the boundaries of compensation claims and the extent of the information provided.

    Value of quality of advice is unimportant if they can neither afford the cost or time to implement it.

    What I feel has happened with the RDR is no-one has looked outside to see already proven ways of introducing change and fact gathering round the subject, it was all out there, retail impact studies and more, raising competence and quality of service, all of it could have been applied here rather than making it up as they went along.

    Which is why I agree with the first comment.

    Here is a very basic retail impact study just for one shop, anyone against will commission the same against the development or pull apart some of the facts in this one, contrast this one shop with the FSA’s information surrounding changing the face of retail distribution of advice in the UK!!

  4. Another great idea thought up by those who cant do just like stakeholder and NEST.

    Until the people involved in these decisions come from ordinary backgrounds and have actually worked in the real world (not everyone earns £50K a year and has a gilt edged finally salary scheme) we will continue to stumble along.

    All the recent ‘changes’ only seem to have benefited those that can afford to save for retirement (lower charges and greater choice on pensions)or pay for advice.

    They powers that be need to realise that the majority of the population are struggling to make ends meet so cant afford to pay fees or start paying into a pension no matter how much financial sense it makes.

  5. Making life as a financial planner/adviser/consultant, whatever you like to call us, ever more expensive, difficult and risky means that the costs to the consumer of accessing those services will increase. How can it be otherwise? That translates directly into reduced access.

    In addition to the FSA’s malicious denial of the protection of English Law in the form of the 15 year longstop for complaints and PII premiums that cause people in other professions gasp in disbelief, the IFA sector is burdenened already with four tiers of regulatory levies. We have the FSA levy, the FOS levy, the FSCS levy plus additional one-off FSCS levies in respect of failed providers that the FSA, on the strength of semantic technicalities, chooses to classify as intermediaries. Soon there’s going to be yet another levy to fund the government’s CFEB initiative, from which £12.5m of central funding is, we now learn, to be denied. So that’ll be FIVE tiers of regulatory levies. Plus, of course, there’s the additional expense of coursework, time ploughing through it all and sitting exams.

    Yet the FSA remains resolutely deaf to all representations pointing out that all this expense will have to be passed on to consumers who are already reluctant to engage with and to appreciate the costs of providing advice. To them, it’s all about “raising standards”, providing “better outcomes” for consumers, delivering “improved value”. All of which rather crassly overlooks the fact that the UK IFA model, imperfect though it may be, is very largely NOT broken and, though positive evolution is of undeniable benefit to all concerned, is not in need of radical reshaping or reconstruction.

    The real problem area is, as we all know, the banks. But, with regards to them, the FSA is hobbled by interference from the Treasury and thus we’re saddled with the Retail Distraction Review.

  6. We are seeing some U turns on RDR perhaps because some of the exponents of RDR can see the tide changing. However, this remains a rather bland fence sitting statement from Nick Cann.

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