Rob Reid: The difference between advice and transaction

Alan Lakey’s recent admission over the practicalities of transition is well timed as it demonstrated that moving to a more explicit charging structure requires preparation.

The comments of Nick Bamford and Ian Head were well made but I think missed a vital aspect of the transition and that is for the adviser to be convinced of the effectiveness of adviser-charging for all concerned.

As Alan Lakey subsequently commented, his issue came about as the clients were not clear exactly what they wanted to do. Does this not underline the difference between advice and transaction?

From a personal perspective, most of my new clients are unclear of what they should do and they seek direction/ guidance in my experience. It is those clients who are in that position that stay with us for the long term.

One party which is not helping with the transition is the Government as both this and the previous one do not seem to recognise the value of advice. I say the Government but I mean the civil service, which is the guiding continuum in this regard.

It is not just ironic it is grossly unfair, for those qualified at the higher level (level six – I know level four is RDR but, let’s be sensible, we cannot make the case for level four alongside other professions). This is where practising certificates would have value and not as at present where they are seen at worst as guarantee to an income flow for the bodies that offer them.

To get to this stage, we need a simplified advice option to sit alongside full advice. The Money Advice Service will, I hope, make it clear why having a dialogue with a qualified individual would help but some Government promotion of this would be a good idea.

Advice and its value are like transparency – they need to be put firmly in context. Telling people the level of charges is not as helpful as showing them the impact on their benefits. The same is true of advice, we need to get across the message of value. I am reassured by the FSA bringing execution-only into the transparency requirements. The recent news that, in addition to rebates, some also made money on foreign exchange simply demonstrated how essential transparency applying to all distributors is if we are to provide the information to enable a sensible discussion over the costs involved in execution-only.

Communication methods and content are key to a successful transition and, like anything new, guidance and practice are extremely helpful. As a workshop immediately before the PFS conference this November, Roderic Rennison and myself are tackling what we see as a major issue when making the transition. For details see

Just as moving from DB to DC moves the risk from employer to employee, the introduction of the RDR moves the risk of all work and no revenue to a more equitable position but to get there we need to get the message across, hence my unashamed plug for our November workshop.

Alan Lakey was right to start the process as early as possible; I suggest we all should be testing ideas and approaches now. Start with individuals you have pursued for some time, we all have them. After all if the new approach fails, what have you really lost? Then move on to current prospects and at each review raise the issue with current clients.

Robert Reid is managing director of Syndaxi Chartered Financial Planners