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RDR “waivers” and will a compromise be reached?

Behind closed doors I’m sure the FSA readily admits that, whatever its intentions, it made a spectacular PR own goal in embargoing a comment rejecting the Treasury select committee’s key recommendation so that it could be published alongside the TSC report.

From a PR perspective the regulator was attempting to kill the story – it was hoping that all the media coverage would lead with the FSA’s rejection of  the call for a delay rather than the call for a delay itself.

Instead, the FSA has enraged MPs who feel they have suffered from the same kind of antics that many IFAs complained about in their evidence to the committee.

The swift rejection gives the impression of a regulator unwilling to take onboard the balanced proposals of the backbench committee. This is not the same McFall-led TSC which too often failed to hold the previous Government and the FSA to account and only late in the day showed any real teeth.

Since the general election and the MPs’ expenses scandal the mood on the backbenches across all the parties has changed. Andrew Tyrie is already proving a worthy chair of this powerful committee and many of its members, especially the 2010 intake, are far more likely to question authority than their predecessors. 

The strength of the MPs’ feelings over the FSA rejection was made clear in the angry comments on the front page of last week’s Money Marketing and then in a letter from TSC chairman Andrew Tyrie to FSA chief executive Hector Sants expressing his dissatisfaction with the FSA’s behaviour.

In his letter Sants said the FSA would soon be publishing guidelines for eligibility for waivers from the RDR as well as looking at whether “further mitigating actions” were required to support advisers who are doing their best to reach the new requirements.

Whether this is the start of a loosening of the FSA’s dogmatic stance on the RDR or simply Sants paying lip service to the committee we do not yet know. 

The FSA  says any RDR “waivers” would be on a case-by-case basis with advisers having to submit a thorough case for why they should be allowed an extension, rather than a general waiver for a certain demographic.

Observing the FSA’s quick-fire rejection of the TSC’s key RDR recommendation, Cicero Consulting director Iain Anderson described the  manoeuvre as a “robust starting point” for  negotiations between the regulator and the FSA.

The letter exchange between Tyrie and Sants has certainly moved on these negotiations  but there could be some more horse-trading to come as MPs and the regulator attempt to create a consensual view. (Don’t be surprised if Sants is hauled in front of the TSC again in the Autumn to explain the FSA’s full response to the TSC’s report).

So, is there an RDR compromise that would be acceptable for both sides?

A few years ago the Personal Finance Society floated the idea of allowing older advisers to remain in the industry for a set period after the RDR is introduced, with a sunset clause agreement meaning they would then leave the industry after this date. Under such agreement the advisers could expect heavier regulatory scrutiny and perhaps increased supervision from their network or other advisers at the firm. The idea fell by the way side but it would be interesting to hear advisers’ views on whether such a plan should be revisited.

Adviser feedback and our online straw poll show the industry is split on whether a one year delay should be introduced with a significant minority of advisers unhappy about other firms benefiting from the extension when they have gone to the trouble of getting the required qualifications within the original timeframe. The FSA warns a one-year delay will lead to momentum being lost.

If the FSA was to introduce specific regulatory dividends, such as lower fees for advisers who reach the 2013 deadline, alongside a one year extension, would more people support the delay and would this allay the FSA’s momentum fears?

After last week’s fireworks it is probably time to focus on finding common ground. Let’s hope the FSA does indeed take time to consider the MPs’ report in full and is prepared to look at “mitigating actions” to help with the RDR’s transitional arrangements to give the reforms the best chance of being a long-term success for advisers and their clients.  

Paul McMillan is the editor of Money Marketing- follow him on twitter here


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There are 27 comments at the moment, we would love to hear your opinion too.

  1. The idea of a ‘RDR surcharge’ for those who fail to mee the RDR requirements doesn’t seem to be a bad idea.

    It could even be tiered so over time, the surcharge goes up.

    It would need to be high enough, so advisers would want to becme fully RDR compliant (or retire) – starting at say £500 per month would allow the FSA and Compliance Professionals to document the individuals competency on a regular basis. After 6 months – it could go up to £750 pm and so on.

    A lower fee would not allow the higher level of monitoing required and for some advisers – might be felt to be a low cost solution!

  2. Surely the Personal Finance Society idea of allowing older advisers to remain in the industry for a set period after the RDR is introduced, would require their advice to be supervised and signed-off by an RDR qualified adviser. Otherwise the public could perceive their advice to be of a lower standard. This would increase costs to a level that is unlikely to be affordable, except by firms that have completed the transition to the Post RDR world, and as such are unlikely to want part qualified advisers.

  3. The issue really is quite simple, do we have government by quango or by elected MPs. All the TSC is asking for is 12 months and even that is beyond the capacity of the unelected dictators! Perhaps now the true regulatory colours are being seen by elected MPs they will have a far better understanding about what it is like to be regulated by these people. The FSMA 2000 must go along with a total rethink of FSA powers. The Financial Services Authority (FSA) is a quasi-judicial body that has failed in every one of its four statutory powers:

    If you need to know what needs to be done ask Hectors Sants: The FSA is not accountable to Treasury Ministers or to Parliament, as confirmed by Hector Sants at a Treasury Select Committee meeting on 9 March 2011. Sants told TSC Chair, Andrew Tyrie, that Parliament needed to legislate to remove the FSA’s non-accountable status.

  4. @Paul Howard.
    Yes Paul, I agree with you to some extent. However, is this not just then bowing to those who haven’t qualified and laughing in the face of us who have spent hours at weekends studying to comply with a set of rules that has been in the mixer for some time now.

  5. This will probably sound harsh to many but there has been plenty of time for advisers to take and pass level 4 exams. If they’ve chosen not to do so, that’s up to them, but those who have should not see their efforts diminished by a last-minute watering down. For many, there has been a clear opportunity cost in achieving a higher level of qualification and those that have incurred it deserve to reap the rewards compared to those that have not.

  6. RDR Waivers will be like FOS appeals or even like
    Personal hearings — permitted but NEVER allowed.

    They will be no more than an illusion created to silence the Select Committee. A case by case basis means that you will have to jump through flaming hoops with your eyes closed and your pockets open just to get to the point that you can be turned down. in no time at all no-one will apply because it will become rapidly apparent that there is no hope of success.

    Its an old F Pack trick

  7. steven Farrall 26th July 2011 at 2:10 pm

    Nope, Sants and the Quangocrats ( a new thrash metal band apparently) won’t go for it. The fact is that the whole FSA is redundant, so the RDR must also be. The purpose of the RDR debate is drag us into trench warfare debating the minutia of the FSA pointless rules and regulations, when we need to be taking them on about their whole existence. Pretty well everything the FSA does would be better donbe by someone else, whether that is the Bank of England as a state organ or the CII as a private regulator concerned with making sure that its members behaved.

    The RDR is simply the final piece in the ‘nationalisation by regulation’ of financial services. It is central planning and it will fail. Oh yes, sorry, I was forgetting. The FSA has already failed.

  8. Paul Howard
    £500/m to stop you having your living STOLEN from you? You’re ‘aving a larf arn’t you.
    How far away from the real world are you dwelliing?

  9. For or against a delay, the previous comments display an element of self interest which misses the point of delaying the start of RDR. The FSA isn’t ready for it yet as all the building blocks are not remotely in place. Europe is yet to announce their ideas for a pan european RDR which is likely to impose a layer of regulation on the market which could conflict with the FSA’s regulation. Just as likely, it will not. However, we don’t know and that is the point. The FSA’s argument that to delay is to increase the chance of consumer detriment has not been backed up with any evidence that I am aware of.
    Most important, is that a delay will give the consumer the opportunity to comment on how they pay for advice in the future and whether they like the idea of choice being removed from them or not. They haven’t been told yet and it is about time they were.

  10. soon to retire 26th July 2011 at 3:01 pm

    I may retire January 2012
    I prefer to retire February 2015
    I have 25 years experience and my clients take up all of my time with the exception of weekends when my grandchildren do.
    I have never had any complaints, and have to prove compitence through CPD (member of a Network) in all the areas of advice.
    Exams prove a level of education which is needed for new entrants into a profession, not those who have proved it over time. This is why other proffessions have grandfathering (i know this has gone) I think its time you all stopped Quarrelling amongst yourselves and got on with trying to sort out your industry.
    Remember we are all guilty until we prove our Innocence. This is agaist your human rights. The FSA is not answerable to the Government or the Judiciary. This is why they treat usthe way they do.

  11. RDR is flawed by any measure and on any level it will fail.

    The fact that some have already passed an exam (which presumably they wanted to pass anyway) in some way justifies RDR and the 2013 deadline misses the point entirely. The TSC themselves stated quite clearly that the evidence in defence of qualifications (remember that old thing EVIDENCE) was ‘very weak’ .

    So why are we trying to defend what is not defendable according to the evidence.

  12. Quote “Old Dog | 26 Jul 2011 2:33 pm

    Paul Howard
    £500/m to stop you having your living STOLEN from you? You’re ‘aving a larf arn’t you.
    How far away from the real world are you dwelliing?”

    Nothing is being stolen from you – as our indusutry has demonstated – we are very poor in ‘risk control’ – and hence, if individuals wish to continue to operate, where they may be a higher risk element involved, is it not fair for those individual’s to pay a risk premium?

    Far to many advisers (both IFA and tied) seem to think ‘I am better than average and have never missold a plan’ – yet we seem to get an endless stream of prdoucts that fail to deliver to the end consumer. Better knowledge will not eliminate this – but should improve it massively.

    Or do you beleive it is fair, that any shortcomings that are shown to be there several years later, fall on the shoulders of the rest of the industry (i.e. further FSCS levy’s)?


  13. Now have level 4 26th July 2011 at 5:36 pm


    Your name says it all!!!! If you are not prepared to buckle down and do the level 4 qualification you shouldn’t be in the profession. It’s as simple as that.

    I pity your clients for having an Adviser that sees the FSA as ‘stealing’ from you, you are giving your business away and probably ‘bleeding’ clients dry with PRODUCT sales that earn you the most commission. Oh, if only you could go back to the old days when a fact find was the back of a fag packet and all you had to do for a sale was say sign here with a menacing glare!

    I for one will be glad to see the back of all ‘OLD DOGS’

  14. Now have level 4 | 26 Jul 2011 5:36 pm

    You are pathetic!

  15. Too busy to read all the comments but did notice anonymous@1:56pm suggesting that all those who haven’t qualified will be laughing in the faces of those that have.
    I haven’t qualified but I certainly would not be laughing at those that have, if there is any sort of extension or grandfathering. I think his otr her comment says more about the character of the person that has made it than the IFAs that have been sticking it out on a point of principle.

  16. Now have level 4
    You are a disgrace to any profession. You know nothing about”old Dog” except that he is not in favour of exams, nothing wrong with that or is there, in your mind?
    To suggest he is bleeding his clients dry is to turn the tables on yourself and say that you must have been doing exactly the same before you managed to attain your superior knowledge, which has miraculously made you an honest ethical adviser in the process. When did you see the light? was it in the examination room or was it when you got your certificate?
    It may come as a shock to you that All the “Old Dogs” will be glad to see the back of your type.
    They may also just manage a smile when that massive compensation bill arrives on the desks of all those smug little bloggers who believed the RDR would bring them to some kind of Nirvana with no more mis selling, high fees, plentiful clients and a pat on the back from sants and co. That will NEVER happen so you carry on in your little bubble which is about to burst. Just dont expect any sympathy from the “old dogs” you kicked on your way.

  17. Well said “soon to retire”. Why is it that so many “fellow” advisers are prepared to denigrate people doing the same thing who don’t agree with their point of view. .

    If you want fair play then turn your attention to the regulators who say “do as we say – not as we do” or you are are out of a job. If their job is as important as ours, they should be prepared also, at whatever age to to take examinations relevant to the job they do. I suspect you do not make this point because it is easier to have a pop at other advisers than at the FSA. They claim to have been selected because of their experience. This is why our clients selected us and not a chartered financial planner. It is the usual story – all men are equal but some are more equal than others – and better paid but not because of the examinations they hold.

  18. Julian Stevens 26th July 2011 at 8:32 pm

    To be fair to Hector Sants, he did state to the TSC back in March that the FSA has relaxed its stance on the exams issue by having approved a number of routes to achieving the stipulated QCF Level 4 threshold which are based predominantly on workplace-based case studies. To name but two, the IFS School of Finance course and, I learned just today, AIFA’s course are deemed by the FSA to be satisfactory. These routes don’t involve scores of hours of arduous study of dense and heavy textbooks containing all sorts of material that the great majority of advisers will consider to be quite irrelevant to what they actually do. Rather, they focus on the ability of the adviser to put together a coherent and appropriate set of recommendations in respect of a sample client scenario with the facility to look up the relevant technical minutiae ~ much as we do in real life. With the AIFA course (as I understand it thus far), there’s just one online multiple choice exam. If an adviser, experienced or otherwise, can’t manage even that type of programme with just a bit of concerted effort to read and absorb the study material, then I think it has to be conceded that they probably aren’t fit to be advising clients. So the FSA does seem to have given some important ground, which must be regarded as a step forward.

    On the issue of CAR (I refuse to call it anything else), I fully support the idea, at least in principle, even though I think the FSA is handling its introduction in a way that’s upset a lot of advisers. If the commission you take on single premium transactions is appropriate to the work you’ve done and the service that you’ve provided, then CAR should hold no terrors. Most importantly, it should put a stop to the banks selling onshore investment bonds at 6, 7 or 8% commission.

    The removal of indemnity commission in respect of regular premium business may be harder for those wedded to it, but I managed without difficulty to make the transition several years ago. It really was quite painless and I’ve never regretted it ~ smoother cashflow, no clawbacks and you actually get paid more over the whole of the earnings period. No study, no fees, no exams, no negotiations with the client ~ just do it and it works. What’s to gripe about?

    As for trail commission, provided the client agrees to it at outset and, in return, gets what he’s been promised, then provided the FSA doesn’t stipulate that providers must all but invite the client every year to switch it off, then I don’t see a problem.

    So, although we’re very quiet on the new business front just now, I have to say that I’m feeling rather better about meeting the requirements of the post-RDR world. I think I may just manage it.

    That’s not to say that I feel at all happy with what I have to pay to support the current regulatory framework (e.g. the FSA’s expenditure on stationery last year of £1.35m!!), but at least I can see myself still being here after 2012 and that alone is cause for feeling better.

  19. What a typically British cock up ! However much experience you have you must take new exams or else as standards are too low ! Oh and by the way if you ‘bribe’ us each month we will let you carry on the way you are already. RDR is a laughing stock. Very little will change, no miss-selling practices will change, people will be further put off obtaining advice and numerous organisations will have made a whole lot of money in the process. This regulator is not ‘fit for purpose’ !

  20. Julian – good post.

    Anonymous | 27 Jul 2011 9:06 am

    So I assume your firm has the minimum stated PII Excess level – as on your basis – having a higher excess level and holding additioan capital would be perceived to be a bribe?

    If you had read my post – if someone isn’t at level 4, they may be a higher risk. And therefore there is a charge to monitor that higher risk. Seems simple?

  21. RDR will FAIL.
    The destruction of mass distribution to UK consumers, along with the associated providers resulting in massive increases in regulatory costs to the remaning Firms/IFA’s to maintain the ever increasing regulatory fixed costs.
    LAUTRO, PIA, FIMBRA etc all failed, now the FSA and I give the next rebadged lot 5 years maximum to FAIL. Only when there are a few Life companies left trading (close to 90 Life companies have shut up shop in the past 15yrs) will there be a review into “What happened to the UK “none banking” and “HNWC” based financial advice industry…….

  22. Spot on Andy 10:12 am.
    all the discussions re qualifications and grandfathering is missing the bigger picture. TO ALL IFA’s the BIGGER PICTURE is that you will all be regulated out of business. The BANKS want RDR to RE-DISTRIBUTE retail Financial services to them, they are owned by Government …. the banks have beem buying the Insurance companies with tax payers money so that they control them. they are recieving the trail fees and renewals that are your embeded value, as directly regulated IFA’s go out of business.
    AIFA and the networks do not care about small IFA’s as the networks will finish up with 100% of your renewals and trails rather than 7% or whatever you pay them today!


  23. The FSA are systematically dismantling to financial services industry in the UK. How many banks have already pulled out of providing advice to ‘ordinary’ customers who need it ? How many staff have already alost their jobs ? How many more will in the coming 12 months as the full implications of rdr sink in ? Is this what the Government meant by ‘reducing the reliance on financial services’ ? Destroying an industry without creating any new ones.

  24. Now have level 4 | 26 Jul 2011 5:36 pm

    You are a disgrace to your profession and the human race.

    You have no concept of the effect that RDR in its present form will have on the industry and its clients.

    Are you even an IFA?

  25. To all those who have passed level 4 29th July 2011 at 6:48 pm

    Very well done but please lift your mentality beyond your own self congratulation and look at the bigger picture – please!

    The bigger picture is we have a regulator that is not elected telling MPs who are elected to sod off!
    There has been no consultation (other than rigged consultation) and RDR is not evidence based. It will cost initially £1.7bn and if you look at the FSA’s own cost benefit analysis you will see that they now estimate the 10 year cost as £3.55bn!

    The FSA are playing with fire but it is you and me and the consumers that will burn. You have danced to their tune this time but mark my words there will be a next time and that time might be your time!

  26. Advising since 1982 30th July 2011 at 2:31 pm

    The comment made by ‘soon to retire’ is the best I’ve seen on any of the RDR threads.

    If only the decision makers had a quarter of his/her common sense we would actually have a decent regulatory body

  27. Jeremy Newbegin 31st July 2011 at 10:01 am

    I fail to understand why any IFA would feel upset at the RDR timescale being altered. Surely those “well qualified” will feel secure in their belief that they are more valuable to the Market than those less qualified? They should then attract more interest and thereby benefit from more business. Let us all stand or fall by the quality of our advice and our service not by our qualifications.

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