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The certainty principle

Financial regulation comes and goes but the bottom line is the same

The retail distribution review was a bad idea, badly planned and likely to be badly executed. The FSA’s recent fudge on platforms, failure to tackle VAT and its foolhardy upset of a select committee are all evidence of a regulator out of touch with reality, never mind the industry.

But the RDR is likely to go ahead, much as it is and on time, so let’s remember some of the basics of our business – fundamentals that have been true for the 30 years I have been a practitioner and which I am certain will continue.

It is a fact people live too long, die too soon, pay too much tax or suffer serious illness. It is also a fact that a great many have the financial capacity to deal with these issues. Meanwhile, a large number amass, maintain and distribute wealth, which these days is threatened by tax, inflation and by the crippling costs of long-term care.

When I was a teenager I used to change car engines. Today, I lift the bonnet and can barely work out where to put the screenwash. The world of financial services is the same.

I had a client in last week who had trawled the internet for quotes but could not decide what he needed. We did the business, on full commission, and wrote the trust. He had not seen one of those on the net. I meet his trustees next week.

People need advisers they can trust and, despite the banks, still prefer independent advisers. So why are many IFAs pessimistic about life after the RDR?
In 1984, life assurance premium relief was removed. It was the end of the world for the old-timers. I remember clients queuing up to buy plans and having a bumper month myself while dreading the next, only to find there was little change.

We were presented with the Financial Services Act in 1988. Tied agents were forced to give clients a piece of paper that said, “You are better off seeing an IFA.” A few left the industry but the wise redoubled their efforts and remained successful. Fact-finds came in. We grumbled but now they are an indispensable tool. Reasons-why letters and suitability reports followed and we thought we did not have time – but IT came to our aid. Ten years ago, commission disclosure was going to be the end of the world – it was not.

Now it is the turn of RDR. In the future, there will be markets where IFAs will not normally operate – regular-premium savings and pension plans the most obvious examples – but the business opportunities for correctly positioned and structured IFAs remain unchanged.

One useful side-effect of the RDR ought to be that we all re-examine our markets and ask what makes commercial sense from 2013. The good news is that plenty still does.

Simon Webster is managing director of Facts and Figures Financial Planners

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