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Treasury select committee launches RDR consultation

The Treasury select committee has launched a consultation on the RDR and is seeking written evidence on whether the RDR will achieve its stated outcomes.

On Tuesday, FSA chief executive Hector Sants told the committee the RDR was intended to deliver a transparent and fairer charging system, a better qualification framework for advisers and greater clarity around the type of advice being offered.

The TSC is calling for written evidence on whether the RDR will achieve these outcomes and whether the outcomes could be achieved in other, potentially better, ways.

Treasury select committee member and Labour MP Andy Love (pictured) says: “We are going to have a brief session on the RDR because the concerns have been raised at committee were loud enough to look at this in more detail. I think that is right and proper, and I am pleased there will be a debate in the house because that again is a reflection of the level of concern out there.”

The committee says at present it is not conducting a full inquiry and no one will formally give oral evidence. A decision will be taken at a later date, in light of the evidence, as to whether to widen the consultation and ask for people to sit before the committee.

The closing date for written evidence is the January 17.


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

  1. Despite the best or, should I say, the worst efforts of the likes of Sheila Nicoll, Fay Goddard and Helen White to stifle debate on their precious RDR, this might just be the first beam of a torch that shows up what a nightmare for consumers the RDR would inevitably turn out to be.

    And praise be there are some independently-minded MPs on the TSC who may be prepared to put to the test the Canary Wharf bureaucrats who think that losing up to 20% of experienced advisers is a price worth paying so that they can “go for broke” on 1st January 2013 and try out their theories on the UK savings market.

    Oh, I forgot. If it all goes “pear-shaped” the FSA will leave it to their successors to come up with something else. There’s contingency planning for you!

  2. Having just read in another publication comparing the loss of capacity to the Highland Clearances, I would suggest that we need more capacity as all IFAs will have met people who have ill-advised by the “Big Institutions”. When we explain where they could get a better deal on their queries, they are most grateful for our advice.
    As to the excess capacity; if there were too many IFAs then natural wastage would ensue because we would not make enough money to maintain our capital adequacy. If we are good at our job then we will remain in business. If not, we go the wall.

  3. I would urge every IFA firm to write to the committee, we must stand up for ourselves for once!

  4. Don’t just comment in these forums, go and see your MP’s in person. Mine did not have a clue about RDR and it’s objectives and was gob-smacked at the 1.6 billion cost of implimentation.

  5. I am right in thinking that most fee based, modern thinking, well qualified, professional firms are not worried about RDR and most high commission, old fashioned, poorly qualified (“ripped people off in the 80’s and 90’s but aren’t able to going forward”) are anti RDR? Or is that just me that gets that impression? Bring it on get rid of commission, get rid of mediocrity. If you don’t like this then I must be right! If you do like it then keep up the good work!

  6. oh dear, the “I’m alright” posters are here already!!!

  7. No, you are not correct Tony.
    There are lots of things in life I do not like.
    This does not make my point of view the right one.

  8. Re Tony Moss @ 09.33am
    Simply put Tony, NO!
    Its about choice,its about access to information,its about fairness,its about a regulator who either has forgotten this,or never knew it in first place.
    If you can’t see this I wonder just how good your advice is,and whats its actually worth,as your ability to research must be flawed.

  9. To: Tony Moss.

    RDR is bad for the consumer. That’s where it starts and stops for me. It won’t stop crooks as they will find another way to lie. It certainly won’t stop the banks and they are responsible for by far the vast majority of problems – in fact it gives them an easier ride.

    If it makes you feel better, though, then that is more a measure of you than it is of the RDR.

  10. This is very good news

    I suggest that all the evidence and consultations already sent to FSA are forwarded to the TSC together with the 3 Charles River Assocs independent reports commissioned by FSA,ABI etc on the LACK of provable commission bias AND the independent legal opinion from a learned Barrister Peter Hamilton on the illegality of parts of the RDR AND the continued ignorance of the law over the Limitation Act – the only people not afforded that protection in law being those regulated by FSA AND the lack of a proper independent appeals process AND in the light of the biggest pension/savings gap for decades a gap which can only be closed by regular savings products – you ban commission on regular savings products and thereby stop distribution of such products. AND at the stroke of a pen you disenfranchise 95% of the population from advice. AND given the fact that Lord Turner states RDR will produce a saving of £500M in mis-selling claims but those who are adversely affected by the RDR constitute less than 2% (and falling) of that anyway.

    then simply ask the TSC to ask FSA why,- when in receipt of all this overwelming evidence that RDR wont work – have you ignored it all and pressed on regardless.

    It is not an unreasonable question to ask ‘what price do you (FSA and the authors of the RDR) pay for failure’ ??

  11. Re Tony Moss’s comments.

    How would Tony deal with a 22 year old lad wanting to start saving for his retirmement, and who can only afford to save £50 per month. Would he charge £500 for his advice/service and be confident of the client paying this on top of the £50 per month? Or would he say “I don’t offer advice to such individuals”

    For all its faults, commission on regular premium business at least gives us the chance to offer decent advice and be paid for it.

    The issue witrh RDR is that it has become and argument over experience vs qualifications and fees vs commissions. The consumer has been forgotten. RDR will disenfranchise a whole section of society from the abilitiy to get quality advice.

    This is fine if you have a quality client base of High Net Worth individuals and have no concerns over the less well off being able to source qulaity advice.

    RDR will not provide a positive outcome for consumers.

  12. Hi Tony Moss,

    In the main I agree with you in princlple. Many of the aims of the RDR are good and businesses that adopt them are likely to do well.

    My problem with the RDR is the way in which it is being implemented with peoples livelihoods being taken from them. If I were age 60 with a successful IFA business I would have to question whether the cost and time involved in taking exams at this point in my career are worthwhile. I would also question why a business model I had successfully run for 20 years plus would need changing when there was no corresponding demand from my clients.

    However, if four years ago when the FSA first started working on RDR they had announced regulatory dividends, such as lower FSA fees and supervision for level 4 qualified advisers and firms operating on a fee basis, I suspect that most of the aims of RDR would have been achieved by now.

    Forcing people to change their business practices and qualify when there is no benefit to them (other than being able to remain in business) is wrong. Incentivising them works and is adopted with a degree of enthusiasm.

  13. I’ve passed nearly all the exams & we’re pretty RDR compliant anyhow. Personally speaking I’ve used fees & adviser charging with clients for many years. Am I sat here smug & indifferent? Certainly not!

    I totally disagree that the Bank Assurance sector.,as a consequence of RDR will benefit. THEY make up almost ALL of the complaints to the FSO. Yet post RDR it’s very much business as usual.

    The costs are astronomical & if 20% of IFAs leave the industry then why should those of us who are left pick up the tab?!!! Currently we pay 28% of the costs of the FSA, so surely we have a right to shout!

    RDR does not address the real problem which is how advice is being sullied with sales targets….Sants & Hoban need to start directing their arrows in another direction.

    I’d like to ask the TSC why the FSA are simply standing idly by while the banks openly defy them over the way PPI complaints are handled?
    If an IFA did that or a small BS, they withdraw their permissions immediately!

    Double standards being applied is to me what is objectionable about the RDR.

  14. Tony Moss | 26 Nov 2010 9:33 am IS wrong 26th November 2010 at 10:24 am

    Tony Moss | 26 Nov 2010 9:33 am

    Its just you Tony! You’re trying to polarize this debate into a them and us issue. There are aspects of RDR that make sense but as Mark Garnier MP said a 3% & 0.5% commission cap would resolve any bias. You don’t need to spend £1.7 billion and cull 10,000 advisers, with less than 2% complaints to make your point. There is no logic other than vested interests, tied distribution and an unelected, unaccountable regulator that is out of control!


  15. Sadly Tony you make certain assumptions, that those in favour of commissions are the high commission rip off merchants and do I get the impression you weren’t about in this profession in the 80’s, 90’s?

    Commission doesn’t have to be high but client’s should have a choice. It is insulting to assume that advisers who are in favour of retaining commission only want to to rip off their client’s.

    I have never agreed with high commissions on investment products and have never taken it. I charge/take 3% across the board. All we need is a level playing field for all.

    And of course RDR is not just about commissions is it or have you forgotten that?

  16. This will be very interesting mainly because the FSA has conducted cost benefit research but missed out the “benefits” and no they are being asked to supply these for the very first time!


    Oxera, the market research firm employed by the FSA to assess the costs and benefits of the changes, expects the net present value of the compliance costs to the industry to reach between £1.4 billion and £1.7 billion. Worryingly, the estimate in 2008 was £600 million. That cost will be passed directly to consumers. The latest estimate represents an astonishing 180% increase. Oxera expects the increase in compliance costs to be passed on to consumers, so they will pay for the changes. Charges will be higher, so sales of financial products will decline. The majority of adviser firms expect a reduction in turnover. Consumers with smaller amounts to invest are much less likely to seek advice if they have to pay for it explicitly. Smaller firms of IFAs are the most likely to exit the market.


    Paul Selly HBOS: “Bancassurers set to benefit”

  17. Re: Tony Moss

    I and many many others have detailed why RDR will NOT work over what amounts to years now.

    Given you (and all pro RDRs) clearly strongly held views, explain in your own words why you believe it will, bearing in mind the stated objectives of the RDR as detailed by the FSA originally and not least the savings and pension gaps and consumer outcomes (FSA speak) ??

    You see, I am perfectly happy for you to do whatever you do if it makes you and your client happy, why have you got such a problem with me and my clients. Furthermore, do you honestly think that I and the majority of those like me couldnt pass a poxy exam ??

    You (and many like you) have missed the point entirely.

  18. The TSC is democracy in action and thank god! They have just poleaxed the FSA by asking a simple question – what benefit?

    I keep six honest serving-men
    (They taught me all I knew);
    Their names are What and Why and When
    And How and Where and Who.

    Source: Rudyard Kipling

  19. Julie B hits the nail on the head in terms of her comments about the sector responsible for the vast majority of bad consumer outcomes being the banks. The RDR is a distraction from this. Though not perfect, the IFA sector delivers vastly higher levels of good consumer outcomes ~ and it’s improving all the time, as may be seen from the steadily reducing proportion of complaints referred to the FOS which are attributable to IFA’s. In short, the IFA sector is measurably raising its standards, year after year after year, without need for it to be straitjacketed into the FSA’s idea of the perfect advisory business, but the FSA refuses to recognise the fact. Will the RDR really result in a quantifiably better IFA sector? Sure, IFA’s will have more exam passes under their belts, but will these exam passes actually lead to “better consumer outcomes”? In certain situations, mainly in the HNW arena, they probably will, but in many cases they almost certainly won’t. Many IFA’s who’ve passed the requisite roster of exams have said that so doing has made virtually no difference to the quality of the services with which they provide their clients. The information that they used to look up, on an as-needed basis, they simply had to memorise to regurgitate by rote in a three hour exam. 3 months later, most of what they memorised to pass the exam has slipped away and they go back to looking it up on as as-needed basis. So what’s been achieved except for a few more FSA boxes to have been ticked? The real test is how well these people are continuing to serve the needs and best their clients and, by that measure, the IFA sector is streets ahead of the sales target-driven bank retail arms.

    But, in spite of all this, the FSA allows the banks just to carry on as usual, flogging high-commission products of dubious quality and even more dubious suitability for the needs of many customers. It is for this reason that I consider a more appropriate title for the RDR to be the Retail Distraction Review, because that is what it really is.

    Until the FSA stands up to the Treasury and protests formally about being instructed constantly to lay off the banks, the situation will not improve. To make itself look busy and radical and forward thinking, the FSA continues to beat up the IFA sector whilst the banks continue, in regulatory terms, to enjoy a free hand.

    BTW, I don’t agree with commission capping ~ 3% of £500,000 is as inappropriate as 6% of £250,000.

    But I do agree with CAR, on which basis an ever-increasing number of IFA’s already operate anyway.

  20. Derek Gair…….spot on.

  21. My MP is Dominic Grieve, I have written to him on many occasions and had a v positive feedback and support.
    Andy why not ask our fellow IFAs to tell you which MPs have been contacted so that we know who needs to be asking for support?

  22. The key point as noted earlier by some is that the argument has to be won by pointing out the detriment to the CONSUMER not to the IFA community AND by pointing out alternative solutions that will work better FOR THE CONSUMER. To that end, fwiw, I have sent a short paper to my MP (who is on the TSC) called “Why the FSA is not treating consumers fairly” including alternative solutions. (And Im happy to email it to anyone who wants to read it –

  23. This is really good news for democracy let alone the IFA market place. The time has come for the regulatory authority to be brought to account along with those with elitist ambitions who have tried to run rough shod over the majority of IFAs who simply want to be professional, caring and honest in their dealings with their clients. I am all for making sure that a client is given the best possible advice according to his /her personal financial circumstances and recognise the importance of having suitably qualified or experienced advisers to do this. So I am not averse to change for the common good but I do believe it is right for clients to decide for themselves what is affordable and how best to pay for this service whether it is by fees, commission or a mixture of both.
    However we all know the role of a Financial Adviser is more than an ability to cope with the technical aspects of financial planning. It is about people handling skills, e.g. an ability to simplify sometimes highly complex detail into that which is easily understood and to be there at times of crisis. This often requires a degree at the University of Life and is only achievable by experience. So if RDR in its implementation is to lose the benefit of IFAs with these skills then it will be a sad loss to the consumer of whom it is supposedly trying to protect. Let us also not overlook that the average age of many IFAs taking exams at this stage of their careers is considerably higher than that of other professions and it is right to accord them greater consideration.
    Hector Sants says RDR will deliver a transparent and fairer charging system, a better qualification framework for advisers and greater clarity around the type of advice being offered. This is commendable but it is given on the premise that the general public is not already receiving a quality service that I find insulting and feel that the FSA have tarred everyone in the market with the same brush. I look forward to the findings of the Select Treasury Committee.

  24. I have been Diploma qualified for 15 years and sat further exams (equity release, MAQ, G60 and more) over the past few years. As you might guess, I also have thousands of hours of CPD under my belt – a requirement ever since attaining MSFA all those years ago. And yet, according to the FSA, I have so much gap-filling to do I might as well start from scratch. From being amongst the top 5% of advisers based on qualification attained 15 years ago, I could soon be prevented from trading. I’m not frightened of exams but at 61 years old why should I be forced to spend many hours studying for exams simply because the FSA has moved the goal posts (again!).

    Most (95%) of my clients are happy with commission. I have never taken more than 3% initial commission even on small investments – anything over £25k and I begin to rebate, sometimes as low as 0.5% initial. If someone, new client or existing client, wants advice without necessarily having to agree a fee before they receive it, I will almost always take the risk that I may do work for which I don’t receive any remuneration – win some, lose some.

    If I am happy with this business model, and clients are getting good advice (with most, I’m sure, paying less than they would with many fee-based firms), what is the problem ? In what other line of business does a government quango stick its nose in to tell the owner of the business how he should charge his customers for work being carried out ?

    We’ve had soft disclosure, hard disclosure and now disclosure at the point of first meeting a client by having to discuss in detail what (and how) the client might pay for advice, even before conducting a factfind. And yet the pesky IFA is still around – still disrupting business for the FSA’s mates at RBS. Even the FSA might be challenged if they were to simply ban IFAs from trading so the next best answer is to come up with RDR.

    The problem is a regulator that doesn’t understand the thought processes of most people who might seek financial advice, has a hidden agenda to rid the banks of pesky IFA competitors, is totally unaccountable for its mistakes and spends (our) money like its going out of fashion.

    By the way, I have already written to my MP. I would urge every IFA who cares about the welfare of his clients and the survival of independent advice for the masses (not just the very wealthy), to do the same.

  25. Heres a very simple formula;

    25 years service times 50 hours per month CPD= 15,000 HOURS= ZERO post RDR

    Assumption. Client time experience during this period of 50 hours per month= 15,000 HOURS may be added = 30,000 hours.

    This does not qualify post RDR, whereas Level 4 does. Must be some exam!!!

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