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The Eve of creation

As advisory businesses get prepared for the impact of the retail distribution review, we are receiving more flesh on the bones about the way that financial advice is to be charged for from the beginning of 2013.

The FSA’s quarterly consultation paper 10/12 outlines a few RDR-relevant issues which sadly I think in some areas simply points out the obvious. For example, advisers cannot earn trail commission unless they disclose it and provide services that justify earning the commission.

Consultation paper 10/12 also contains a proposal to amend the FSA handbook so that adviser firms must notify the regulator if any staff member breaches competence and ethics rules.

May I ask you how likely will this happen? As the issue of ethics rises in importance, we have financial advisers forming self-interest groups to determine how financial advice should be provided.

I was fortunate to attend the inaugural meeting of the female IFAs and brokers group set up by Vivian Slattery a director of IFA Monetary Solutions to help promote the standing of women financial advisers and mortgage brokers within the profession. Held in Fidelity’s offices in London, the only male in the room was Geoff Mills presenting his thoughts on wrap and platform issues. What a change to be in a financial services event with an absence of testosterone (no offence Geoff!).

It is a shame that over the last 10 years female advisers have constituted only about 8 per cent of all financial advisers. IFA Promotion’s will allow the gender of independent financial advisers to be specified in their consumer search free of charge. In fact, all IFA listings are free, so why IFAs choose not to be listed on unbiased is beyond me. Even if IFAs say they do not want or need new clients, I defy any IFA to turn away a free lead that is a high-net-worth or corporate client.

In the meantime, watch out those IFAs who stand still as Project Eve is set to launch next year. This is a group of six male and female financial advisers who intend to reinvent the way that financial advice is perceived by and given to consumers. The group believes financial planning should be like life coaching and should focus on giving people the resources and financial expertise to help them move forward and achieve what they want in their lives. The mighty UBS is helping the project financially to deliver free financial planning for people in financial difficulties.

The number of options for those who are financially excluded or unable to access regulated financial advice, those who will never have to be concerned about the RDR’s adviser-charging appear to get larger and larger. There is Cfeb, the Citizens Advice Bureau and numerous debt counselling services to name just a few. If I were my recently made redundant friend who is not fee-tolerant I would be so happy for her if she could build for a lifelong financial planning relationship with a professional to share her wishes, dreams and personal information, knowing there was a financial planner the quality of “iron man” Bruce Wilson, ACA FIFP CFP DipPFS, (a founder of Project Eve), to make recommendations on what she should do with her hard earned money – free of charge.

Perhaps the FSA should concentrate even more on getting financial advice to those that really need it, to those people who will never be lucky enough to be affected by RDR adviser-charging.

Kim North is director of Technology & Technical


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There are 2 comments at the moment, we would love to hear your opinion too.

  1. Kim should certainly tell her friend who is “not fee-tolerant” to contact an IFA because of course adviser charging is not fee charging and never has been. Adviser charging is simply about the client and the adviser agreeing the cost of the service without interference from the product provider. Any IFA who wishes to, post RDR, can continue to offer a bundled package of advice/implementation/remuneration through the product. We need to find a better way of describing the way that advisers get paid because “commission” and “fees” are both inadequate (and emotive) ways of describing adviser charging.

    On the other hand her not fee tolerant friend should absolutely not contact us because we think advice is valuable and will certainly seek to charge her for that regardless as to whether or not she ended up buying a financial product.

  2. I agree with Nick. The mindset of Kim’s not-fee-tolerant friend indicates a fundamental failure to understand the difference between advice and being sold a product, even though the former may lead to the latter. All to often, though, the latter is dressed up as the former.

    A true adviser will make clear from the outset that his services are not available on a speculative basis in the hope of getting paid some months down the line as a result of having sold something.

    But it can be hard. I received a call only yesterday from a woman whose husband needed help completing the paperwork to vest his pension fund. But they balked at the idea of paying even a nominal fee, even though quite a bit of work may well have been required to ensure he got the best deal, quite possibly not with his existing provider. GAR’s? OMO? An enhanced/underwritten annuity? An annuity at all? Then again, if all that was required was help with the paperwork, then how did they expect me to be remunerated for my time?

    The biggest lessons that the public need to be taught are that IFA firms are not charitably funded institutions, that advice is not the same thing as or inextricably linked to the implementation of a product and that commission alone may not necessarily cover the cost of advice and product implementation.

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