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The outer limits

Publicists say you should not complain if you are in the news but you should worry when you no longer make the news.

Over the last week, we have watched one peer after another talk themselves into trouble. Many would argue they said nothing wrong but the pressure to fall on your sword these days is immense, hence my surprise at the invective that followed the publication of Dan Waters’ imminent exit and Hector Sants’ comments on attrition caused by the RDR.

It reminds me of the Monty Python sketch about The the MacKamikaze Highlanders where they all attempt to throw themselves off the battlements and as the last few arrive they are restrained lest the regiment be wiped out.

Dan Waters was one of the few people in regulation who seemed to understand what I do for a living. Given the changes in regulation in the US, Dan’s return comes as no surprise to me.

Hector’s comments were no surprise and the lack of a constructive response showed that people were reacting and not thinking. After all, I believe Hector’s numbers are probably correct, if we consider who will leave either due to failing or skipping the exams.

If we then think about how many will fold, due to them being unable to create the same level of income under adviser-charging, then another 20 per cent will probably follow.

Far too many advisers produce a level of business they find hard to increase. The inevitable reduction in their income as a result of adviser-charging will require a significant increase in their activity levels. When that does not happen, they will have little alternative but to call it a day.

Some still believe the RDR may be cancelled in whole or in part. This is not good. It will happen and there will not be any extra time. Time is precious and it should not be abused.

Since the days of Colette Bow at the PIA, there has been an effort to reduce the size of the adviser population. This will not help the public but it will help the FSA. It is just a pity it is meant to be helping and not handicapping the public. If grandfathering were to become an option it would simply defer the time when the public ask the difficult questions.

The other week, I watched the planning equivalent of a car crash as a bank and a provider prompted someone to cancel a potentially exempt transfer by their collective lack of knowledge. In the style of Donald Rumsfeld, there are known unknowns but it is the unknown unknowns that will get you. Knowing your limits is essential but if you do not know what they are, you are positively dangerous.

The concept that one person can operate as a GP-style adviser is not tenable. The sooner everyone knows their limits, the sooner we will benefit from the RDR.

As to all the “raised voices” posting comments on the web, I return to the words of Monty Python: “Is this the five-minute argument or the full halfhour?” We need to make sure the arguments are positive and not just hot air if we are to have our voice heard over the noise.

Robert Reid is managing director of Syndaxi Chartered Financial Planners


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. This piece of yours, Mr Reid, is probably the most myopic, one dimensional offering on the RDR that has been served up throughout the whole of 2010.

    I hope to goodness you manage to get yourself sat alongside Mr Sants when the latter is summoned to reappear before the Treasury Select Committee next year to justify the way the FSA is going about implementing the RDR.

    The pairing of the two of you would virtually guarantee the whole RDR thing was stopped in its tracks before it inflicted irreparable damage on the consumer and on many in the IFA community.

    So keep it up, Mr Reid. This sort of stuff will positively incite people who hold qualifications equal to yours to make written submissions to the TSC before the 17th January deadline pointing out the disastrous way the RDR is being implemented.

    And it’s nice to have it on good authority from you that the RDR “will happen and there will not be any extra time”. You’ll be eating those words before 2011 is out.

  2. Robert, I know you are well-meaning and have the interests of your clients at heart – like the bulk of the IFA population – however your fondness for the RDR is misguided.

    You talk of inevitable market forces where advisers struggle to survive and this may be true. However natural erosion and unnatural regulatory culling are entirely different things.

    Natural evolution will provide the winners and losers. New firms will spring up as failed models fall by the wayside. Do we need a regulator to not only speed up such a process but also dictate what, in its opinion, is the preferred business model?

  3. Natural evolution is the phrase on IFA’s minds. Innovation and evolution are welcomed if that is what RDR brings but it is the FSA’s implementation of RDR that is flawed. The link below seems to sum up some of the issues pretty well.

  4. I think Alan has it right.

    Evolution progresses by natural selection, not ethnic cleansing.

  5. It amazes me why so many advisers and even networks are opposed to RDR. There seem to be two main points:
    1. Advisers with a higher level of qualification should be able to give better advice. That’s why I did my exams so that my clients get the best advice. What’s the downside in that?
    2. Everyone has to know what your turnover is from the work that you do for them. Taking McDonald’s, as they have been used as a recent comparison; you know that when you buy a Big Mac that’s their turnover, you don’t expect the cow do chip in a few extra quid on top, do you? You don’t know the cost of production but then how many adviser know the cost of production of their advice?
    So should we all have a higher standard than a couple of GCSE’s before we advise someone on their life savings? Of course we should who can really argue against that?

    So should we be allowed to take commission with the clients consent? I’m thinking of those clients who can’t pay for their advice separately. Could this be the real middle classes? There used to be pension schemes where great big chunks were taken out of the contributions and then came along stakeholder and the pensions became more beneficial for the clients.

    Yet in the not too distant future we will have to charge people say £800 as a minimum fee to set up a pension of just a £100 per month. Is this beneficial to our clients and the public as a whole?

  6. The British population are not saving enough and not protecting themselves sufficiently. This statement is universally accepted wisdom and cannot be disputed.

    I believe that all regulation should be measured aganst the effect it is going to have on these twin gaps.

    Will the RDR make this situation better or worse? The answer is too obvious to be worth stating.

    Mr Reid should be less smug and support those who are genuinely concerned about the effects of this well intentioned but ill thought out regulation. Is it vested interest that encourages him to take this stance?

  7. The thing I find funny is the way that the majority of pro RDR advisers appear to be threatened by those that are anti.

    Just get on with it, you are already RDR compliant and if you are right all my clients (and those of every other anti RDR IFA) will come to you. In fact, I am amazed they havent already made a mass exodus to you lot – funny that.

    Now if you want to play in a slanted market (fiddled by the regulator) then thats a different point altogether. Thing is though, free markets always win in the end.

    On the point about Stakeholder made @ 9.41 – look at the take up rate. Why do you think that is ? Why do you think we have the biggest savings and pension gaps in decades ?

    Finally, never forget that this business is a people business no amount of knowledge will substitute that. I have come accross 100s (employed some too) with all the knowledge, exams and no clients – wonder why ??


  8. Why if you say anything that is in favour of the RDR (or change in general) are you then described as (select anyone or more from the following list);

    have “vested interest”
    an idiot
    a fool
    a lover of the FSA

    (all of the above I have seen in various debates)

    Why not just argue the facts rather than insult and call names?!

  9. The whole point of a blog is for discussion over particular points of intersted and concern.
    I am satisfied that the points that are now being made by many IFAs and completely captured by MPs on Monday has been helped by these blogs.
    I feel my case is now totally clear and coherant and when I have my meeting on the 14 January with my MP I will be clear from comments made by fellow IFAs as to the salient points I will make.
    Sorry matey but if you have been following the many blogs I read you will have seen excellent argument – hot air and silly analogy we will leave to self publicists.

  10. I thought I was arguing the facts Nick Bamford and my reference to vested interest was posed as a question not a statement and as such was not intended to “insult or call names”!!

    I should have also added the question: Does the FSA also have a vested interest in reducing the size of the cottage industry to make it easier to regulate?

  11. Why do those in favor of RDR so often appear to be afraid and seek to impose their views on others ?

    What is wrong with choice ?

    Do you want to pay by fee, use CAR ( not the same thing ) or commission ?

    Do you want to deal with a qualified adviser ? or continue to deal with your adviser of 25 years standing ?

    Be brave – let the public decide. Stop acting like religious zealots who insist that everyone has to do it their way or be burned at the stake.

  12. RDR is coming, there may be delays and reprints of reports and time scales, but lets face it these changes must be for the benefit of our clients. I support the Grand fathering idea but it must be suitably monitored and reported upon.

    I am 56 and do not yet know if I will study or learn to play Golf. One thing is for sure though, should I stay in the industry I will be required to up my game in respect of regulation and qualification at some point, be it 2012 or 2013.

    I have taken a some what leisurely glimpse of what is required as of today, and to be brutally honest it is not beyond the vast majority of advisors to qualify. Its the time out to study and the unwillingness to upskill that is really the main hang up.
    Its OK for the larger city IFA’s who are able to absorb the expense and loss of revenue over time. We are a 2 man office who will struggle. Please don’t tell me we have had 3 years to prepare etc etc, we have been in business 2 years having walked from Bancassurance. My partner is younger and more able than I to study and probably pass the exams with his eyes closed. But he is only 27 and the vast majority of our clients wish to see me for advice. I can’t see how that would change simply because he has one more certificate on the reception desk.

    Is it me or am I making sense to any of my business minded advisors ?.

  13. If it ain’t broke ~ and, in the main, the current range of IFA business models manifestly isn’t ~ why is the FSA so hell bent on fixing it? The answer, of course, is to distract attention from its inability to address the real area of poor advice, driven by targets to sell sub-standard high commission products.

    I visited some new clients yesterday evening (well outside normal business hours) who, from bitter experience, were in no doubt as to why they want nothing more to do with any bank “adviser”.

    If the current range of IFA business models were broken, then surely this would be reflected in a mass defection of clients to fee-charging businesses run by the likes of Rob Reid and Nick Bamford (no disrespect to your particular business models ~ they have their place), a vastly higher proportion of all complaints referred to the FOS being attributable to the IFA sector (is 2% really such a problem as to warrant the sledgehammer juggernaut of the RDR?) and a vastly smaller number of clients returning time and time again to the same IFA with whom they’ve dealt for many years.

    What many IFA’s object to is being coerced into the straitjacket of the FSA’s idea of the perfect business model and the opinions of all these highly qualified IFA’s who consider that their way is the only way. It isn’t. Why can’t you just live and let live?

  14. @Dick Carne

    Dick I guess the point is that everyone has a “vested interest” including those who don’t wish to change in any way. It is just that it is levied too often as an argument against those who will cange or who have changed.

    You need to ask the FSA if their intention is as you describe it, to reduce the size of the IFA community although I suspect they will say “no”

    And you described Robert Reid as “smug” is that a fact or an insult?

  15. Going back to the article……

    This quote by Robert interested me. “The concept that one person can operate as a GP-style adviser is not tenable. The sooner everyone knows their limits, the sooner we will benefit from the RDR”.

    The small IFA must find it harder to be all things to all people. But my experience tells me that such a firm often has the ability to see it’s short comings and will find ways to fill the gaps. We do that ourselves in a number of ways.

    It is wrong to assume that small means bad. It also wrong to assume that less qualifications means poor advice. That is too simple a conclusion based itself on hot air.

    It is interesting that a challenge to the present RDR proposals is seen as a threat rather than healthy input. It is clear to anyone that RDR is not perfect and needs further improvements before it is implemented at the end of 2012. One things is for sure, RDR must not be delayed because it has sensible objectives that will improve clarity in the advisory process. Any form of bias has to be stamped out, and the recent antics within FIFA should be another reminder of what RDR must achieve. Whether that is indeed the motivation of the FSA and other professional bodies is not so clear perhaps, and certainly bully tactics suggest otherwise. The most important objective for our industry should be that we are able to reach as much of the public as possible with good financial advice at a fair price. I believe we are already achieving that but wish Product Providers would not continue to try to attract business by offering incentives of any kind to the Advisory sector. It is disappointing that the FSA has not stamped out this sort of behaviour a long time ago.

  16. My feelings are that there are good and progressive points being made by RDR, the acid test being if the public will benefit. My issue is we have a regulator which has out of control budgets and practices. It is clear that their interest is not to best serve the public and yet they hide their reasonings behind decisions they impose. Why do they ignore expensive research and push through ideas which are overwhelmingly described as dangerous to the economy and counter productive to good affordable financial advice for the masses. I have no confidence in them to either put forward credible cost benefit analsys or introduce regulation which is comprehensively thought through. This has nothing to do with exams, it is down to their past performance, a lack of integrity, wisdom, accountability or transparancy in the FSA’s general attitude. I would like them to operate in an enviroment of fear, as they wish IFA’s to do , and I would like them to be held accountable for the gross abuse of pay and bonuses they have taken while accomodating bank governors both past and present. It seems to me the FSA is in truth a huge part of the problem and not the solution as they try to suggest. Many others have lost faith and I hope they do not get to wriggle out of their bad decisions as easily as they are letting other persons of authority and responsiblilty.

  17. This is not about CPD whether achieved by exams or other means. This is about equality and the fact that we are being singled out for the loss of our living if we do not live by the dictat of the unelected FSA. We should all be protesting about this body having the power to close our businesses when no other professions are treated in this manner. Its is “do as I say – not do as I do” Degrees in psychology or philosophy have no more relevance to the work being done by Hector Sants than any of the acadamenic qualifications we might possess prior to RDR. If they cannot apply the same standards to themselves – and the Government to at least its own Ministers then this is fundamentally injust. Give way to this line of thinking now by supporting RDR and what happens again a few years down the line when the precedent has been set ? ?

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