With just over six months to go, the RDR is – quite rightly – at the forefront of everyone’s minds.
But as the deadline nears, I am looking at what the adviser land- scape may look like after December 3 and what part the networks will – or won’t – play in a post-RDR world. A few murmurs suggest some people are looking to leave networks and advisers are starting to ask questions about what they actually do.
Let’s remind ourselves why advisers were drawn to networks in the first place. The simple answer is regulatory protection and an upgrade on commissions. An IFA recommending a pension would typically get a commission of 130 per cent through Lautro. This could rise to 140-150 per cent through the network, with the upgrade of commission covering most of the cost of being in a network.
Historically an IFA who joined a network did so with the perception of regulatory protection. Yet if the FSA turns its attention to networks for particular scrutiny, IFAs will realise how little the network can give them.
The world post-RDR will be a different place. All investment advice will be fee-based with the customer agreeing the remuneration before advice is given. And no commission means no commission upgrade from networks.
There’s also the issue of complaints. When you belong to a network, the handling of the complaint is outside the control of the adviser – who simply foots the bill.
But the main reason I fear for the future of networks after the RDR is the regulator’s demand for consistent advice across the board. Networks are made up of vastly different individuals, each with their own style and system. I can’t see how consistency can be achieved, and I’m sure the regulator will be asking the same questions.
Following the RDR, I believe the FSA will turn its attention to networks and how they run their systems and financing. And I think networks will be extremely vulnerable to robust regulatory attention due to their historic advice liabilities.
Is the relevancy of networks still there post-RDR? I fear not. I do not believe they will have a place in the world the FSA is trying to create – one centred on transparency and consistency.
I think advisers should head towards being directly authorised using support companies or established firms where they will feel safe.
Sheriar Bradbury is managing director of Bradbury Hamilton