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Tierful ending

The RDR document has been described as revolutionary. That it certainly is, but it is also deeply divisive. It is a product of flawed thinking, in fact a madcap scheme, a confused drawing, where few of the dots are joined up.

It proposes monumental changes which, assuredly, will result in an “us and them” world. In reality, there will be two tiers of adviser – professional planners and the rest. Additionally, there will be two tiers of consumer; those that can afford to and choose to visit the professional planner and the rest of them.

Now forgive me for backtracking here but the purported basis of the RDR is to induce consumers to saving and insure in greater amounts and numbers, isn’t it? Surely, it is not about lining the pockets of the bancassurers and those providers that operate direct salesforces? Surely, it is not about reducing the scope and quality of the products being sold, is it? The realists among us know the answers while the theorists pontificate on the next area to meddle with.

The RDR promotes elitism. Charging fees or passing exams does not make a professional. There are also the matters of how to conduct yourself and how to treat clients and assist them in meeting their needs and fulfilling their aspirations. Passing exams only proves that you are good at passing exams.

What barefaced arrogance to advocate that lower-paid consumers do not need independent advice. What utter nerve to suggest that any old product is better than nothing. What audacity to imagine that the bulk of financial advisers, mostly small and commission-based, will sit back and yawn their way into this predatory new world and extinction.

It was not so long ago that the PIA – you remember them, don’t you? The regulatory body that phoenixed into the FSA – paid my firm a compliance visit. After much delving, it expressed concern that we had selected a different insurer to one recommended by our network-provided research system. It felt that our client would be confused because we had overridden the system and opted for a different provider.

In short, it was concerned about two important matters. First, that we might have confused the client and, second, that the “best” product might not have been selected. While I disagreed with its synopsis, I could not fault the logic. However, in the new predatory world proposed in the RDR such concerns will be extinguished. Apparently, it will not matter that consumers might be confused by the numerous tiers of adviser and by the fact that any bank or firm can term itself independent as long as one of its many advisers is a professional financial planner.

Yet, far more disturbing is this insidious mindset that low to middle earners deserve low-quality advice. That their reward for this form of financial apartheid will be expensive and indifferent products foisted on them by lower-grade salespeople. This is reminiscent of the pre-war class system with the haves and the have nots, the winners and the losers, us and them. Has progress really come down to this?

Two major questions emerge from the many – will the proposed changes increase the take-up of financial products and, if they do, is this descent into financial plutocracy a price worth paying?

The old adage says that insurance is sold and not bought. While a glib generalisation, this maxim continues to hold true, particularly for those on the radar of the primary adviser. It is for this reason that commission is the preferred route as often the consumer does not value the advice sufficiently to pay a fee, assuming they can afford to. Resurrecting the direct salesforces will, undoubtedly, increase savings and insurance, but many IFAs have already traversed that route and, having realised its limitations, progressed to independent status.

The bancassurers and providers will be able to design and push high-charging products with the full support of the regulator. So, this consumer focused organisation, which boasts of achieving better outcomes for consumers will be consigning millions of low to middle earners to the same voracious hordes that scavenged the financial landscapes of the 1970s and 1980s.

Simple solutions for simple consumers? This cannot be the way of the future. Let’s pray it does not all end in tiers.

Alan Lakey is director of Highclere Financial Services

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