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Tory peer attacks FSA over RDR access to advice

Howard Flight Conservatives

Conservative peer Lord Howard Flight has warned the RDR will result in advisers losing interest in serving clients with less than £100,000, and attacked the FSA for failing to understand people are not prepared to pay for advice.

In a letter to the Financial Times this weekend, Flight (pictured) says the FSA is “hell bent” on the RDR’s commission ban, despite the detrimental effect this will have on access to advice.

In the letter Flight says: “The rich will be affected little; they have the resources to pay for advice.

“But financial advisers will not be interested in those with savings of the order of £100,000 or less who I doubt will be willing to pay fees out of after-tax income, of the order of 1 per cent or 2 per cent per annum. The net result will be many fewer people getting any financial advice.”

He suggests a better approach to financial advice reform is what is happening in Germany, where IFAs are allowed to opt out of a commission ban with their clients’ permission.

Flight adds: “The problem with the Treasury and the FSA’s elitist attitude here is they do not appear to understand ‘the man in the street’ is not willing to pay what would be significant regular fees out of after-tax income when frequently no changes are being made to their holdings.

“The message is clear – give up bothering to save.”

Last week Money Marketing reported Flight is tabling an amendment to the Financial Services Bill which would scrap the Financial Conduct Authority’s new powers to publish early warning notices.

He claimed the powers, which would allow the FCA to publish details of firms or individuals that are subject to ongoing enforcement investigations, amounted to “lynch mob justice”.

Attain Wealth Management managing director Gordon Crothers believes there are viable models to deliver advice to those with less than £100,000.

But he adds: “Unfortunately whilst I do love this job, I do not just advise for the fun of it and I do have to make a living. Sometimes I think the FSA forgets that.”


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There are 25 comments at the moment, we would love to hear your opinion too.

  1. Finally some sense… doubt it will stop the stupid ban though!

  2. 1 fundamental issue with this peers argument. No-one cares about the little guy now, nevermind post RDR. Net result? the same.

  3. All well and good, but RDR is not a new topic and one has to question the motives of a last minute rant. Is there any real prospect of a change to the RDR plans? which will clearly lead to reduced access to advice for most people.

  4. Yet another good article with sound common sense that will of course end up in the FSA’s ‘laugh and tear up’ tray.

  5. At last – somebody actually understanding what the effect of RDR is going to be.- hundreds of thousands of small savers (whether investment or pension savings) being cast adrift because the small IFA cannot afford to service them and the larger firms will not be interested. When will the FSA ever listen to people in the know!!!!!! – another fine mess that will unravel in a few years time!

  6. He suggests a better approach to financial advice reform is what is happening in Germany, where IFAs are allowed to opt out of a commission ban with their clients’ permission.

    THAT seems sensible to me!

  7. I realise that you are a Lord but Please Please Please try to keep up and pay attention.

    The RDR has been around for 5 years plus and IFA’s have been lobbying for a similar amount of time.

    Why didn’t you help us then rather than wait until now when the money has been spent, the damage done and the livelihoods lost.

  8. Like I’ve said all along, why restrict payment options for a Client, when there is no need to.

    The FSA are like the ‘Political Officers’ in Stalist Russia; determined to carry out their perverted ideology at any ‘expense’. They disgust me.

    And sadly there’s not a thing Lord Flight’s comments will change.

  9. Bit of a Flight of Fancy

    Soren has a valid point. But the issue of funding trail via the platform is also well made.

    I have thought that in many matters and this one in particular, the Regulator is behaving like a fundamentalist member of the Taliban. Deaf to reason and eschewing compromise.
    Fundamentalism doesn’t help – pragmatism, flexibility and common sense does.
    How hard is it to disclose the charges? Most clients don’t relish direct charges for on-going service. This is not the same as charging for initial advice – which clients are far more willing to meet.

  10. good artical as soren says, but this will have already hit the bin at the ivory towers, because they really don’t care, and certainly won’t listen to anyone, let alone a tory peer.

  11. Just as i have thought for the past 18months / 2 years RDR has not really been publicised, now it is getting a little bit of exposure in the broadsheets people are starting to read into this a bit more, and contemplating the consequences.

    This has been the main plan for the FSA to keep it locked in the cupboard till its upon us, and unleash it on the public when all the money has been made/wasted and its to late to do anything about it.

  12. So a Peer of the realm appears to have sussed out that 10’s of thousands of consumers will be disadvantaged by the commission ban !

    The article mentions a comment “Attain Wealth Management managing director Gordon Crothers believes there are viable models to deliver advice to those with less than £100,000.”


    Will someone please tell me how this works ?

    Fact Find, needs analysis, cashflow forecasts, product research, suitability reports, attending clients at home or office time etc etc, etc.

    All these things are required to be done, prior to any product transaction or intermediation service is provided.

    How is this going to work, these issues alone take some 8-10 hours overall (minimum) If Gordon Crothers has a system to reduce these regulatory requirements, I want it, I want it, I want it !!!! Please !!!

  13. Roman Duzinkewycz 20th August 2012 at 12:33 pm

    Sensible comments but, what makes anyone think the FSA care about clients?

  14. Soren

    Regarding your question to Howard Flight ‘Why didn’t you help us then rather than wait until now when the money has been spent, the damage done and the livelihoods lost’.

    Can I politely request that Lord Flight puts this very same question to his esteemed colleague in the House of Lords who has been Chairman of Aifa since the RDR was a twinkle in Callum McCarthy’s eye?

    I would be fascinated to learn the answer.

  15. Another case of closing the door after the horse has bolted. Too late RDR is already here, the banks have been laying off staff for the last 3 years, and even though I have QCF4 I have decided to leave the industry as costs for network fees, licences have just become prohibitive. Better off stacking shelves with no risks.

  16. The RDR was predicated on a numptie’s theory of how things should be.

    It was forced on the industry by an unaccountable body where the use of cogent argument has proved futile and whose top guys are jumping ship faster than fleas on a drowning dog.

    Many, many of us have formulated sensible methods by which transparency and fairness can be incorporated into the existing model at little cost compared to the monstrous waste of funds involved in the current shambles.

    Ultimnately the issue always returns to the fact that despite the negative public comments by MonseySavingExpert, the TSC, many industry head honcho’s, Howard Flight, Godfrey Bloom, numerous personal finance journalists and the overwhelming majority of practicing advisers the FSA has displayed the dogmatism of Napoleon and the insight of Custer and continues to lumber towards the biggest attack on consumer choice since Dick Turpin said, “Your money or your life”.

  17. @Alan Lakey
    Alan, it is not often I find myself disagreeing with you but surely history will shine a more favourable light on Custer & Napoleon when viewed against the actions of the FSA. Custer & Napoleon may have been recklessly stupid but at least they did not jump ship before the **** hit the fan.

  18. Sorry, @Anonymous.

    I was too magnanimous in my appraisal of the E14 vandals.

  19. The FSA and Ryanair would make very good bed fellows. Neither gives a damn about what the rest of us think and it’s impossible to make any headway regardless of how you approach the discussion. RDR has been flagged up for the past few years as a disaster about to happen and 4 months before the doodah hits the fan it’s probably to late to stop this happening. The FSA is a law unto itself and Ryanair seems to think its a law unto itself so they definitely have something in common.

  20. I can commend the peer for highlighting something which frankly the savings side of financial services lobby (if there is one) has not been effective enough on.

    For those us who have ridden a few times around the magic round a bout the writing is on the wall. Have you noticed Labour who brought us RDR have started to lambast the industry for not giving advice to the less well off. This is not their lack of memory in that they brought it in its their way or working. They will campaign for charges for advice to be spread so the masses can have advice. Yes in 10 years we will return to what was there before Labour squeezed it out and we will be held up as the bad guys again.

  21. Too late old chum.

  22. Hecktor Protecktor 21st August 2012 at 10:19 am

    So Lord Flight advocates the German model where clients have the option to opt out?

    Well I wonder where that would lead us?

    Probably to a situation where 100% of an adviser’s clients all “decided” to opt out – after a 5 second reference to the option from some silver tongued adviser, or even worse, just being asked to sign on the dotted line without making any reference at all.

    I appreciate advisers need to get remunerated but in some cases, trail commission is paid for years and years, eg taking 0.5% a year off a pension or even more. It’s extortion and I look forward to it being banned.

  23. No, Hecktor (?), there must be a middle way. I do agree that there has to be a framework of safeguards for the consumer, but the RDR is just a symptom of the regulator’s failure to regulate and it simply equates to restraint of trade.

  24. Hecktor, would you rather pay 0.5% out of your pension or 0.625% out of your income? If you are a higher rate tax payer, you would be paying 0.833% and a top-rate tax payer would be paying 1.00%.

    However you pay it, your financial adviser must be paid or you won’t get advice. All the FSA have done is make it more likely that your costs will be paid for out of your taxed income.

    Commission is nearly always the most tax efficient way for clients to pay for their advice and the FSA have taken that option away from you.

  25. Larry in London 28th August 2012 at 3:39 pm

    My Darlings!

    RDR has nothing to do with quality of advice, consumer outcome, qualifications or anything.

    RDR is about TAX… VAT on adviser fees: One flip of the pen by the Chancellor will have every ounce of work done by IFAs falling under the VAT umbrella.

    THAT’S why the FSA is has steadfastly ignored every sensible argument against RDR. That’s why the government has done nothing to stop RDR.

    The majority of consumers will be denied access to quality independent advice so that thy myth of free healthcare can be perpetuated — the money garnered in VAT on adviser fees will be poured into the bottomless pit of the welfare state.

    The FSA still behaves like Gordon Brown’s poodle. He set it up (along with stakeholder pensions) to INCREASE DEPENDENCY ON THE STATE. Stakeholder contained no provision for distribution so non was distributed. RDR goes one step further — LIMITING distribution.

    Sometimes you really are my little cabbages, aren’t you? So cute and cuddly but so untrained in critical thinking!

    Larrykins x

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