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FSA's Geale urges IFAs to ‘give RDR a chance’

by Michelle Abrego on Nov 29, 2012 at 09:57

FSA's Geale urges IFAs to ‘give RDR a chance’

The Financial Services Authority (FSA) is often accused of being out of touch with IFAs, but it is not an allegation that can be levelled at David Geale, the man charged with dragging the retail distribution review (RDR) over its impending finishing line.

Geale (pictured), appointed the FSA’s head of investment policy after his predecessor Peter Smith departed for Dubai in May, was previously an IFA before making the move to Canary Wharf.

Prior to switching from poacher to gamekeeper, Geale worked as a bank adviser. He moved on to become a financial and mortgage adviser for a number of small firms, and was an appointed representative of a major insurer before becoming an IFA.

‘I know where they [IFAs] are coming from,’ he said. And similar to IFAs, Geale has had his work cut out with the RDR.

Guiding light

While the majority of IFAs have come around to the merits of the RDR and the benefits it will bring consumers, there is still anger directed towards the regulator from some quarters over the manner in which it has communicated the reforms.

Geale, though, is adamant that advisers have ‘got more than enough [guidance] ahead of the deadline’.

Despite confusion remaining over the regulator’s definition of restricted and independent advice, he said the regulator had no plans to come out with further clarifications and that the final guidance should be enough for advisers to understand and follow.

‘We did quite a lot of research into the various labels we could use, and what we were seeking was something that was clear and that consumers had a chance of understanding,’ he said.

‘[Our] research led us to keep with [the] independent and restricted [labels] rather than anything more complicated than that. We could split hairs on “what do you mean by unbiased” and [some might argue] that there is a more standard definition of independence, but our research led us to that [the final guidance].’

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132 comments so far. Why not have your say?

Bob Donaldson

Nov 29, 2012 at 11:28

What about exam qualifications. That to me is not an impressive CV.

Basically he appears to have spent his life as a mortgage advisor which more often than not is a transactional business rather than building long term relationships with clients which is what most advisors do.

The Jury is still out however if there are issue with the RDR and the advice gap whose head is going to be on the block I will bet it is not his!

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paul hart

Nov 29, 2012 at 11:35

I agree with Bob! Not a very impressive CV at all. As for addressing matters that don't work? Don't make me laugh!

By the way, how do these muppets get such cosy jobs at Canary Wharf?

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JM Keynes

Nov 29, 2012 at 11:37

God! If I had my time again I would join the FSA.

Regulation is the only growth area in financial services.

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Jonathan Kirby

Nov 29, 2012 at 11:38

10 years away from the 'coal face' is a very long time in financial services.

With all the architects of RDR out of the way it amazes me that nobody has the guts to admit they have got this thing horrendously wrong.

Until that happens I suspect that the FCA will not have any respect from those of us in the real world who have to deal with this mess.

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Nov 29, 2012 at 11:39

@Bob Donldason

So 9 years transacting mortgages (and having short tenures with each company I might add!) gives you all the experience you need to become FSA head of investment policy!!

I am a believer that people with the right skill sets and behaviours should be promoted into the right positions even without the necessary experience; things can be taught and learned....but what you don't then expect is for that same person to tell us how to do our jobs when we have potentially stronger CV's, experience and qualifications....and skills sets and behaviours!

RDR is having a major impact on our industry at ALL levels. I'm happy to give RDR a chance but to be honest it's less than 1% chance!!

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David McCabe 1

Nov 29, 2012 at 11:41

As far as the labels of independent & restricted are concerened, I don't think any advisers have a problem with the names per se (none that I have spoken to, anyway), it is the ridiculous attempt by the FSA to change the actual definitions that cause the friction & resistance.

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Phillip H

Nov 29, 2012 at 11:44

"...FSA research, published in the wake of the Deloitte report, backs up Geale’s view, showing 63% of advisers plan to retain clients with savings and investments worth between £20,000 and £75,000, while 38% will retain those with less than £20,000.."

How does this back up Geales view that there will be no significant advice gap. This means 37% of advisers will get rid of clients in the first bracket and 62% will get rid of client in the second bracket. That's HUUUGGEE.

And it would be naive to conclude that the other % will mop these up and there is a huge difference between dumpting them becauuse they are unprofitable and actually seeking out these unprofitable clients!

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Barry Barnes

Nov 29, 2012 at 11:45

Give RDR a chance!

I wasn't aware that there was an option!

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Smithling via mobile

Nov 29, 2012 at 11:46

There won't be an advice gap as such. Well... not one that can be proven.

It will just increase the bracket that the high street banks get their paws on. If you can't afford an adviser then you go to the bank.

Where you get fleeced.

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Nov 29, 2012 at 11:46

Only a fool thinks the term 'Restricted Adviser' is a sensible one, especially when it brackets single tie, multi tie, and whole of market advisers together. It's a 'paradise term' for SJP and their ilk though.

Do the FSA really think this term provides clarity to the consumer?

I also agree, his CV is poor.

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Hugh Jars

Nov 29, 2012 at 11:49

Some would say posters (me included) are nit-picking about the CV ....but the facts are there to see.... 8 jobs in 19 yrs....hardly instills confidence in him being around in that post for long, ....seems like a bit of a 'journeyman' When recruiting people I rarely get past page 1 of job history when they look like that....

Experience tells you a butterfly never stays long on a leaf that shakes a bit.

Can't help thinking that it's a bit like Robbie Savage pitching up at the ManUtd training ground and trying to 'teach' Ryan Giggs how to train properly, and take free kicks.

(no disrespect intended to Robbie Savage)

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Des Pondent

Nov 29, 2012 at 11:49

So.....a bank adviser, a mortgage adviser with a number of small firms, an AR with a life company and then an IFA. In that order? The only David Geale I can find on the FSA register is an inactive ex Bradford & Bingley trainee investment adviser between 2001 & 2002. So, agree with Bob Donaldson's comment, not an overly impressive CV.

Merits & benefits for consumers? Which consumers are those? Not the lower end of the market surely.

I agree that we have had plenty of guidance, albeit confusing and contradictory, ahead of the deadline. Why then is the FSA delaying its final guidance on platforms until sometime in 2013. Afterall, it is their deadline!!!

So Mr Geale your message has done little to lessen my anger towards your employer.

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John Thornton

Nov 29, 2012 at 11:49

Rather than take pot shots at the Gamekeeper, why not seize the opportunity that RDR presents to those IFAs who truly understand what IFA stands for and puts the best interest of their clients FIRST. What the FSA (RDR) is trying to do is help your business to live long and prosper. Work with them not against them. This is a hugh change (and opportunity) and we all need to pull in the right direction.

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Charles Rickards

Nov 29, 2012 at 11:54

At least this person has been in a customer facing position at some point during his career. He was obviously smarter than a lot of others as he could clearly see where he could secure a good salary and benefits package. In addition, he makes the rules and doesn't have to follow them and pay for the priviledge of doing so.

We will all have to give RDR a chance anyway, whether we like it or not, or choose to do something different!

As I have said before, it will be very good for a minority, but worse for the majority. Which means it is fully in line with governments, both in the UK and elsewhere.

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Graeme Ferguson

Nov 29, 2012 at 11:55

Actually I was working with David Geale when he left to join the FSA and i remember his rational for joining them, which was partially to do with the salary and dare I say it BONUS payments they were willing to provide.

Saying that David from my memory...which is fading these days, was a nice guy.... however I would agree that his working knowledge of an IFA sector and the challenges of the RDR would be limited!

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Terence O'Halloran

Nov 29, 2012 at 11:55

And Geales salery? Qualifications? Ability to run a successful business? Like token minority group employees this appointment is pure evidence of beaurocratic arrogance.

Put someone in place that has the relevant qualifications and at least 20 years experience and asks relevent questions of practitioners before acting and you will secure my acceptance of ther status. This is a sick joke.

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Dominic Thomas

Nov 29, 2012 at 11:57

I was under the impression that advisers are giving RDR a chance (at least those that I have spoken to). Most recognise the importance of better qualifications, improved processes and greater focus on the client. I have yet to meet anyone that believes that clients should not be told how much they are paying for advice.

The main gripe with RDR is not the intention, but the manner of application, which appears to largely ignore valid concerns and very real practical problems. It isn't always possible to simply start with a blank piece of paper - as with advisers, we cannot simply have an ideal set of solutions and get rid of everything that doesn't fit that model. We have to adapt, apply common sense and take account of what is in place and determine carefully whether replacement is better than addition or amendment. This seems to have been sadly lacking in the regulators approach to RDR - or at least the way in which it has been presented across various media (which may of course not be entirely accurate).

I think the way in which more senior advisers have been effectively booted out is shameful. Small businesses are the backbone of UK plc and whilst far from perfect, most are helping the nation to become less dependant upon the State, which is broke by most definitions. Certainly the industry needs to be cleaned up, but it appears to me that the focus is often in the wrong places - on those that actually do least damage.

Equitable Life advisers often lauded their commission free approach and I don't see any better example (despite lots of rubbish policies or investments) doing quite as much damage to UK investors as the demise of Equitable Life.

We have evolved our skills considerably over the last 10 years or so, when was the last time you came across someone that had a WOL policy sold as a savings plan? or a front end pension? Systems and Controls are miles better, disclosure, FINANCIAL PLANNING is being done properly by many and GROWING...yet we all get tarnished with UCIS blowups, phoenix business, tax dodging nonsense and moving a pension for the sake of it. if we want to inspire TRUST the regulator needs to start by trusting us all rather more, although I can certainly appreciate their negative view given the experience that they find. We can all do better, who genuinely doesn't want to improve their business? so can we PLEASE have some partnership and collaboration on this Mr Geale.... or have I missed something rather obvious to others?

I'm reminded: "Authority is like a bar of soap, the more you use it the less you have".

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Kathy Booth

Nov 29, 2012 at 12:00

Hmm, give it a chance, and if it fails - where next?

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Nov 29, 2012 at 12:02

Well its good to see so many of you focusing on the content of the article rather than the CV (presumably only published to attract these types of inflammatory responses). Some of what he says actually makes a lot of sense.

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sol trader

Nov 29, 2012 at 12:02

They're even telling us what we are angry about now.

Was this conclusion reached after a survey monkey which went something like..."what makes you the most angry? A.) the way the regulator has communicated RDR B.) Bob Geldof or C.) Mother Theresa (you must, by law, answer one of these questions or you will be liable to a fine or prison without trial. You will also be liable for costs and forced to pay for our pensions for life)

I am prepared to give RDR a chance but let's draw a line in the sand. If it turns out to be rubbish, it is 100% the fault of the regulator and lobbyists who dreamt it up. They pay to put it right out of their own pockets.

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Sid Cynical

Nov 29, 2012 at 12:03

I have just had a vision of Mr Geale and his smug grin sitting down with a Turkey (Xmas Theme) and saying " C'mon Turkey give christmas Day a chance, w'ont you") - Somebody tell Mr Geale that Turkey's dont vote for xmas!!

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Simon Mansell

Nov 29, 2012 at 12:03

"While the majority of IFAs have come around to the merits of the RDR and the benefits it will bring consumers."

The Emperor cannot see the cloth himself, but pretends that he can for fear of appearing unfit for his position or stupid; his ministers do the same. It takes a child in the crowd calls out that the Emperor is wearing nothing at all!!!

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Nov 29, 2012 at 12:13

Independent Voice:

"As the final countdown begins, our latest report reveals 38% of IFAs predict a drop in their total client base as a result of the RDR. The majority of IFAs remain sceptical of any benefits the RDR will have; only 25% agree that the RDR will transform the financial advice market for the better and only 18% agree that the end investor will benefit as a result of the RDR."

With such small support, its obvious that the FSA consulted only high earning wealth management firms and pushed RDR through to meet their own agenda. You don't tend to get support this way.

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Simon Mansell

Nov 29, 2012 at 12:24

A lie told often becomes the truth unless refuted and then it remains a lie! The FSA thought police are attempting a reconstruction of the truth. There was “no” consultation and there is no “consumer benefit”. RDR is an expensive act of financial vandalism and it will not be forgiven by those it has abused.

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stephen lyth

Nov 29, 2012 at 12:25

The man is obviously bright enough to understand that working as a transactional advisor was never going to be succesful under RDR. Hats off to him for grabbing a salary with bonus potential and knowing full well its like earning money for old rope at the Regulator !!! Whist im on, can anyone confirm that thebuilding we bought for the FSA has now been sold to the Chinese or is that just a nasty rumour concerning thier future bonus strategy ?

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Nov 29, 2012 at 12:33

Everybody sing: All we are saying, is give fees a chance....

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Tony Clarkin

Nov 29, 2012 at 12:36

There was a time when mediocre advisers would to gravitate to mortgages or management.

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Nov 29, 2012 at 12:41

"David Geale, the man charged with dragging the retail distribution review (RDR) over its impending finishing line"

Haha! With all the king rats having jumped ship (Hector et al) even the FSA have the nous to appoint a patsy !

Can't wait to see the film, "The Life of David Geale" ; the true story of man who set himself up to be shot down in flames.

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Simon Mansell

Nov 29, 2012 at 12:48

@stephen lyth Nov 29, 2012 at 12:25

If you look at the FSA’s own cost benefit analysis you will see that they now estimate the 10 year cost of RDR as £3.55bn buta alas they can't calculate a penny in gains! !Perhaps they sold part of the FSA Fine Art Collection to the Chinese in order to transfer the funds into their final salary pension shorfall? Although they are able to raise an additional levy from advisers to cover this, as well as the £3.55bn - rumour has it that there won’t be enough advisers left to pay.

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Chris Geeson

Nov 29, 2012 at 12:49

So "give it a chance" and i've just spent this morning talking to my Standard life consultant as to how you keep what you already thought was yours post 1/1/13. The buzz word is unintentional outcomes which is a bit like a serial killer saying sorry for getting blood on the carpet somewhat missing the bigger picture. Why should we, the biggest losers, want to give this a chance, those who prepared through fund based have now been given the stickiest of cricket wickets if they want to keep it going forward. Those who sold pensions on regular premiums are becoming VAT inspectors and money lenders by usage of the Consumer Credit Licence for any fees collected through the contract. Fund based commissions be very worried as to how you are paid and whom you are paid by and woe betide any changes you make without your clients agreeing again to what they have already agreed to before.

The vast minority of IFA's are fee based totally and for those who have the RDR so nailed down that they, their staff and their cllients understand very well done

However In all honesty do any of us feel their client base understands what is about to happen to us,them, the system and its providers.

Of course IFA's will give RDR a chance otherwise we are out of a job, but the expected outcomes aren't particularly great and some of the unexpected outcomes are simply stupid.

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Nov 29, 2012 at 12:55

Listen up folks. the poor man has had depressing jobs with employers that have a voracious appitite for commission, poor training and little regard for customer service. No wonder he feels RDR will benefit clients!

He is probably also the 'last man standing' from the original group that put forward RDR as a solution to some of the industry's poor behaviours, so gains promotion regularly!

At least he has experience of trying to go it alone, but this was probably not very successfull.

Don't blame Mr Geale, blame his superiors who formulated an ill thought out plan, then scarpered to pastures new before any blame can arise.

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Duncan Carter 2

Nov 29, 2012 at 12:56

I have no quarrel with this guy but one real concern I do have is the apparent lack of perception that seems to abound in connection with adviser status.

Independent is pretty straight forward but Restricted is not. Client's won't get it and I know this having spent a year trying to explain it to client's. They are fine with the current situation, understanding how an IFA works for them and how a tied adviser works for say a bank or insurer.

When however I try to explain how someone who is currently an IFA but simply focusses on one or more specialisms, will become Restricted post January and they will be in the same category as the Bancassurer etc, they just can't see it.

This chap says the FSA did quite a lot of research in this area. My questions are who did they ask, how did they position the questions, how big was the cohort and why did the FSA feel the need to change what was a a generally well understood concept?

Intellectual dogma possibly or change for changes sake? I simply don't know the answer!

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Simon Kershaw

Nov 29, 2012 at 12:56

I am reminded of the Sex Pistols and the question that remains their epitaph.

"Ever get the feeling you've been cheated?"

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Terence O'Halloran

Nov 29, 2012 at 13:02

@sol trader has my vote.

The FSA / FCA can have RDR if they as individuals accept the full financial consequences of its failure, PERSONALLY. Some might call it mis-selling. I call it fair play.

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What Planet am I on today?

Nov 29, 2012 at 13:11

"While the majority of IFAs have come around to the merits of the RDR and the benefits it will bring consumers.........."

EVIDENCE please ....

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Enjoyer of early retirement

Nov 29, 2012 at 13:14

He`s obviously very bright

1) He realised 10 years ago that the brightest future was in gamekeeping rather than poaching &

2) That boot-licking & following the party line is the best route to promotion & bonuses.

How many of us realise in retrospect that we had had his foresight?

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Julian Stevens

Nov 29, 2012 at 13:21

Having now managed to clear the new qualifications hurdle, I find myself considerably less anxious about all the other aspects of the RDR with which I'll have to conform. For example, I don't see how integrated adviser charging is likely to cause any problems other than for those who've managed to get away with taking excessive commissions for many years (and we all know who, in the main, those people are).

If a (new) client comes to me (now) and says he wants to invest just £5,000 in an ISA but backs off when I tell him I'm not prepared to do it for less than, say, £400 payable by a mix of 4% commission and a fee of £200, then so be it. How will things be any different after 31st December if I tell the same client the same thing, except that half of my £400 charge will be by way of a provider-facilitated adviser charge and he'll still have to pay me £200 on top?

Or are the concerns of some IFA's about the client with £100,000 to invest who may take issue with an adviser charge of 3% that has to be spelt out as £3,000?

I don't see clients of modest means, after 31st December, becoming any more or less disenfranchised than they have already been as a result of the endlessly increasing burden of excessive and excessively costly and inefficient regulation.

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The Rumpo Kid

Nov 29, 2012 at 13:27

@ A J

I'm singing: 'All we are saying is give fees a chance'

Can I also add the next verse...

'Everybody's talikin' 'bout Revoulution, Evolution, Masturbation, Flagellation, Regulation...

It seems most of this is emanating from Canary Wharf at regular intervals.

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Jonathan Kirby

Nov 29, 2012 at 13:59

@ Julian Stevens

Glad to hear that you too have cleared the qualification hurdle.

One of the main problems is that if you look at a post RDR quote where the advisor charge is separated from provider charge, the figures look quite large even for modest remuneration as, rather than focus on what is paid, the focus appears to be on the effect of charges in reducing the fund.

But, if you charge a fee and an annual service charge, then the plan looks much better value because, surprise surprise, instead of clarity you have obfuscation as the cost of advice is divorced from the performance of the product.

The whole thing actually has the opposite effect to what RDR claimed to be about and, yes I did warn about this two years ago.

Why didn't they listen?

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Dan Rear

Nov 29, 2012 at 15:16

But, Julian, which providers, other than platforms, are going to facilitate an intial AC, never mind an ongoing AC? So you may have to take directly from the client £400 payable to you, plus £5000 to, Invesco, for example.

Have I got this wrong?

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Julian Stevens

Nov 29, 2012 at 15:39

It seems that more and more fund management companies have decided they can't be bothered with the hassle and expense of reconfiguring their systems to accommodate AC. This is probably because they see an ever increasing proportion of all money invested into their funds coming via platforms and are quite happy about that because it saves them the time and expense of issuing contract notes, valuations, having to deal with redemptions and all that sort of thing. It's also a PITA dealing directly with most of the fund management companies directly anyway. So we, like most others I suspect, will do everything via platforms, even if that route may be slightly costlier than going direct. The benefits all round are worth the extra cost.

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Simon Mansell

Nov 29, 2012 at 15:54

@Julian Stevens

In agree with Julian about platforms. Also, it seems to me that regulators don’t quite get it. A platform is way of facilitating whole of market advice and not restricting it. RDR guarantees the future of platforms and the demise of small funds not admitted onto platforms. This will stifle new entrants and will not be in the consumer’s interest? The RDR camel is a horse designed by a regulator!

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Phil Castle

Nov 29, 2012 at 16:02

I assume Mr Geale has a Level 6 then? He must have done his FPC 3 back in the mid 90's and of course continued on to advanced.... I aslo assume if a member of the CII he has sat and passed R01 (regulation and ethics) and J07 (supervision in a regulated environment). If he doesn't have these, then I don't think referrring to his ONE year as an IFA is very balanced as it gives the impression he has come up to the new level 4 when actually if he doesn't have it, if he leaves the FSA, where will he go next? Oh yes Dubai....

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Graeme Ferguson

Nov 29, 2012 at 16:06

@ Simon?Julian

The problem is that the FSA does not forward model its ideas...therefore the mayhem that happens is a result of no idea of ramifications.

An example cash rebates on platforms are not transparent.... really?? Skandia must have some lobbying team thats all I can say!!

I plot out my day how I can go about ripping off client who are getting cash rebates in their cash accounts...doesn't everybody!!

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Chris Geeson

Nov 29, 2012 at 16:25

So thats it then, the consensus is off we all drift into the dark following our governers and yet all the time knowing they are inadequate in so many aspects its scary. Is this as good as it gets because one of those weird side effect thingies to all this seems to be the total destruction of our industry, you can almost hear the banks applauding.

As someone famous once said " its not the end, its not the beginning of the end but it is the end of the beginning" trap set ready steady go

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Neil Liversidge

Nov 29, 2012 at 17:07

If you chuck enough money at some people, you can get them to say anything. But that doesn't mean those on the receiving end will believe it. Unlike you Mr Geales I have to write my own paycheque - and my employees' - every month, So save your pontificating, I really don't want to hear it.

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Philip Melville

Nov 29, 2012 at 17:47

No one ever " used to be an IFA ".

It is the best job in the world if you can do it and you only give up when you fail.

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Ian Lees

Nov 29, 2012 at 18:51

It appears the only people who are restricted are the FSA ! Restricted in their knowledge of what an IFA / Broker does ? Restricted in the close busienss relationship between IFA/Broker /FinancialPlanner and theri customer - not client and how they work together to bring about serious financial outcomes. The Flawed Service Association - has no idea of how any proper broker IFA or Financial Planner operates - as it is int he very best interest of the IFA and Cusotmer to work with a product provider - for the best interests of all concerned. Unlike sales people and those restircted by service contract and products - who - as my old manager used to say " as one door closes - another slams in your face ". Life is a challenge and to be a Hunter - rather than a Farmenr to pinch the phrase of a n other - the role of IFA Brole and Financial Planner is to work with customers - not to fleece them for a sale and not be able to return to them for more than six years - meanwhile using lists pf prospects ( or in the case of banks their clients ) - to be in the right place at the right time - for the sale of a product - oftern too much protection or the wrong type of protection becasue the reason for being there is to generate the sale of a product. Once Mr Wheatley realises this . . .perhaps " the Devil will ride out of the FSA ! "

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David Hedge

Nov 29, 2012 at 21:15

The bloke's a complete idiot if he believes the complete crap reported here. Talk about swallowing rubbish, he must have been swimming in a cess pit to repeat this fools' mantra.

Like the rest of the cretins of Canary Wharf.

Like others, I wonder what qualifications he has for the job. The CV implies that he couldn't hold a job for very long and was unsuccessful as an adviser.

Like all the rest he's not fit for purpose, just like the FSA.

RDR was good for insisting that advisers took qualifications, but to believe that advisers will continue to devote time to servicing people who can't or won't pay the price is just fantasy thinking.

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Nov 29, 2012 at 21:53

What has this guy been smoking? It surely can't be legal!

Another "out of touch with reality" regulator who appears to have been less than successful in an advisor role! Of the 38% of adviser who intend to continue to deal with investors with less than £20,000, I wonder what their typical client profile is anyway. If this is typical of all their existing clients they would have to say they will continue otherwise they'll have nothing. The same applies to the others in the £20,000-£75,000 band.

I was approached recently by the daughter of an existing client and she wanted advice on investing £10,000. I told her we don't usually deal with such small sums but in this case we would because of who she was. When I told her my fee which I discounted to £300 because of who she was, she suddenly decided to look for a high interest bank account on the internet.

This suited me fine as it was going to be a bucket load of work with eternal liability for a few quid but these types of people are going to get a wake up call that advisers don't work for free. What surprised me in this case is her father knows what our fees are and has never had an issue. he even thinks we're cheap for everything we do for him. Some of the public will be fine as they know nobody works for free. The others who want it all for free can politely "do one"!

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Julian Stevens

Nov 30, 2012 at 11:34

Only £300? A generous discount indeed ~ virtually below cost. All this talk about the RDR creating an "advice gap" is rubbish. For a multitude of other reasons, the advice gap is already here.

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Dominic Thomas

Nov 30, 2012 at 11:51

New Model Adviser. I am really rather concerned that you continue to permit people to publish comments under false or anonymous names. A significant proportion of the comments posted about this item are very unpleasant and make me rather embarrassed to even be in the same industry. I know a number of advisers have given up bothering to respond on-line due to the toxic nature of many of the comments. At what point did it become acceptable to make comments about individuals at the FSA like this? I wonder why people hide their identity, perhaps their confidence in their own business actions is rather less certain than they protest.

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Phil Castle

Nov 30, 2012 at 11:59

Dominic - Whilst I agree with you about pseoidonames, it's irnic that some of the most critical comments has actually come from those of us willing to post under our real names!

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Dominic Thomas

Nov 30, 2012 at 12:10

@Phil Castle - I think criticism is perfectly fine, when it is reasonable and well argued and ideally offers a solution, but much of what I have read here is simply rude and rather puerile reverting to the lowest common denominator.

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Hugh Jars

Nov 30, 2012 at 12:14


I'm afraid that until you clarify whether you are Dominic Gerard Thomas, or you are actually Dominic Sebastian Richard Thomas, (FSA Register) or indeed the other Dominic Thomas (currently inactive) you are as guilty of obfuscation of names as the rest of us who prefer to use a pseudonym.

Lets be serious though, anyone who does post unsavoury content about the FSA individuals is particularly foolish, as I've no doubt if they wanted to, they will have the power to force Citywire to reveal the identity of the poster......

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Julian Stevens

Nov 30, 2012 at 12:18

I quite agree with the suggestion that CityWire should disallow posts to be made under false or pseudo names, not least because many of those who do so seem to consider them a licence to make personal or, in some cases, childishly vitriolic comments, not just about people at the FSA but about other people who are prepared to post under their real names. I think you should take a much tougher moderation stance on comments that insult or belittle other posters or what they've posted. Expressing a different or contrary point of view is one thing but dissing that of somebody else as claptrap (or worse) is not, IMHO, acceptable.

Why don't you address this, CityWire, and allow only those prepared to use their real names to participate here? To register, they'd be required to submit both their firm's and their personal FSA registration numbers ~ a simple enough verification mechanism I would have thought. For those who aren't FSA registered, an alternative ID verification process shouldn't be too difficult to devise. Such people should also be required to disclose their status, such as Retired IFA, solicitor or whatever. Don't you wish to be seen as a professional forum for professional people, even though some of us may occasionally still allow intemperance to get the better of us?

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Chris Geeson

Nov 30, 2012 at 12:37

This is not personal to the individual however what is being done to my industry feels very personal to me. and lets be honest who do you blame if not your regulator who keeps moving the goal posts. Personal attacks are not and never have been what this blog should be about but it should reflect the outright amazement at some of the statements made by the FSA about RDR and how it will or will not work.

Professionalism is great, proven by qualification, if thats seen as the correct way to do it, ok fine BUT you cannot tell any IFA that this will make his/her life easier or better and you cannot tell a huge raft of the general public that this will allow them better access to better advice.

So two questions, who IS the RDR for and WHY ? please believe me this is now a very genuine and heart felt question because my industry is being ripped apart by a process which seems to have very little benefit for any involved.

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sol trader

Nov 30, 2012 at 12:46

I agree with Phil Castle and would even go further to say that for the 99% for whom self regulation is the real answer, they probably moderate or abstain from personal attacks precisely because they are using a sobriquet.

Personally, I try and reserve my sarcasm for institutions rather than people. Some posts may upset the hard working, assiduous and fair minded people who work at the regulator - I hope not, but they should know their employer has been responsible for needless anxiety and depression amongst the IFA community.

Not being a facebooker and only recently a twit(ter), I assumed it was the done thing to choose faintly amusing stage name for blogging. Now, I'm sticking to my guns precisely because of the closed minded, nomenclaturephobic, comments of our friends above.

It's not what you are called it's what you say that counts otherwise we end up like...Animal Farm where four legs good, two legs bad (to misquote)

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Hugh Jars

Nov 30, 2012 at 13:02


Here's a novel suggestion :

Why don't the FSA open their doors to our opinion ? by simply having a Blog akin to these Citywire etc blogs.....

That would open up some lively (even perhaps 2 way) debate, on everything that is current/ critical and of direct meaning to us all......

I am a current IFA -sole trader) and would be more than happy to jump through the registration hoops you suggest if they did have the sense/bollocks to open up such a conduit.

After all, -- I get more frustrated by the spin the Citywire journalists put on some of the articles,-- which they do to be provocative.

A direct FSA blog might help to cut that out, and would also remove any of the Vitriol.... and cut out a lot of the provocative Journo Spin...

It might actually be the only way of getting a collective protest to them about the really important things like FSCS levies....., as the 'professional' bodies to which I continue to shell-out money -to don't seem to be able to.

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Duncan Carter 2

Nov 30, 2012 at 13:11

Although the subject matter of the article has now seemingly shifted to a tangent, the issue is relevant because of the freedom of speech/press issues brought to a head under the Leveson enquiry.

He [Leveson] has raised issues regarding the uncontollability of the internet and I think accountability is really important. Anonymous comments can be very damaging and I believe they should not be allowed.

Citywire and other bodies could moderate and place comments submitted in a good cause to protect whistleblowers but some of the comments made both her and elsewhere are defamatory, insulting and ultimately pointless.

I would welcome the abolition of anonymous comments, there is nothing to stop those who do not wish to be identified in sending their thoughts to a journalist who can then put their name to an article following appropriately evidenced research.

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Phil Castle

Nov 30, 2012 at 13:12

@ Big bottom - I agree with you an FSA open Blog discussion with people like David Geale and Rory Percival would be a good idea from IFAs perspective. The last FSA seminar I went to was in Bath and the IFAs didn't pull any punches, but Rory Percival stood up quite well.

Yoy are quite right about inflamtory journalism and it's not just Citywire to be fair. Networks and compliance firms often over egg what the FSA have actually said and give it a different spin. Peter Smith's speech on Life Settlement plans which was published was actually very good, the articles tried to cause argument, when in fact the problem was that the FSA hadn't raised their concenrs earlier rather than what Peter Smith actually said.

A more open regulator, by commenting and running their own blogs could be a good thing. There are enough of us who will say what we think publicly now I think.

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Dominic Thomas

Nov 30, 2012 at 13:12

@ "Hugh" For the record D S R Thomas.

@Chris Gleeson I totally sympathise with anyone that is struggling with the application of RDR, which was meant to be for the benefit of UK consumers, but it is very difficult to see that this will not simply benefit the wealthy (and won't repeat my initial post). What is particularly frustrating is the assumption that advisers are all a bunch of cowboys and not to be trusted, so we have become regulated to the point of submission.

In fairness to the FSA, they have issued plenty of Consultation Papers, but very few advisers every read them (like the Leveson report) and assume that Providers and Industry representatives, Compliance firms, journalists etc will put their case forward and think of all the unintended consequences. Whilst understandable, (for busy people) frankly its not a terribly clever approach to rely on others to represent your concerns. "Hugh" CPs ARE the conduit to FSA thinking. To fail to read them simply reasserts to the FSA that if you don't read about stuff that has a direct impact on your business, why on earth should they believe you read a product document properly? This has been going on for SIX YEARS.

If RDR improves processes (it should) it will reduce risk to the business (by having logical, repeatable processes with clearly defined charges and services) then IT WILL MAKE LIFE BETTER for advisers and clients. However the application of RDR has been shambolic and badly thought through. How advisers are paid and from where is frankly a red herring if there is proper disclosure and bias to products/providers is removed. Evidenced by Bond v ISA v pension commission structures influencing product selection let alone providers offering "enhancements".

Yes we are over regulated, but frankly that's because we have made such a colossal pigs ear (collectively) by swallowing the provider information without challenging it impartially. if we could all demonstrate proper due dilligence and good practice, I am sure that the FSA might pay attention to calls to reduce or lighten regulation.

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Phil Castle

Nov 30, 2012 at 13:16

@ Duncan - I agree. MM are sensible & moderate comments. I have just had one not published as it was criticle of the FSAs handling of arch Cru and referred to the words fraudulent and preference with regard the settlement agreed between the FSA and other parties which means that the advisery sector will get hit harder as a result of arch Crus failure than Capita and the depositary banks.

The noonying thing about the modetation of comments is that they don't tel you when they haven't submitted it and unless you've copied what you sent, you can't adjust it until it proves acceptable to them.

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Simon Mansell

Nov 30, 2012 at 13:20

@sol trader Nov 30, 2012 at 12:46

“ Laugh a little and teach your men to laugh--get good humor under fire--war is a game that's played with a smile. If you can't smile, grin. If you can't grin, keep out of the way till you can.”

Winston Churchill

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Alan Lakey

Nov 30, 2012 at 13:24

Lucky we didn't give Hitler a chance.

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sol trader

Nov 30, 2012 at 13:31

thank you Simon - my tongue is now firmly back in my cheek.

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Philip Melville

Nov 30, 2012 at 13:41

Can anyone tell me what is the problem with the RDR other than the removal of commission ?

It seems to have become responsible for the ills of all the world and yet the only issue which requires any effort for advisers is that of learning how to express their value to the public.

I know I am thick but if you have been serving poor people under a commission system both parties know there has been a cost for what yo do and all you have to do is work out how to get them to pay you that same cost in another way.

Surely if you actually do care about poor people getting advice you will make the effort to come up with an acceptable way of charging them for your service ?

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Julian Stevens

Nov 30, 2012 at 13:47

I suggested many moons ago an FSA-run forum for IFA's and others to put questions to the powers that be, to point out potential collateral damage arising from some new policy or other and to suggest alternative approaches. Perhaps, in some cases, even to offer praise where praise might be due.

But, as you might expect, the FSA didn't deign to respond, probably because it considers itself above any sort of direct interaction with us, the Great Unwashed, and we might just ask a few penetrating questions to which nobody at the FSA would be able to come up with a remotely credible response.

A couple of months back somebody from the FSA did actually post under his own name something on the blog about the distribution of lots and lots of leaflets about the MAS via CAB's all round the country. I asked him to tell us how much it had all cost and on what basis the FSA could possibly think that the CAB would be a remotely appropriate distribution channel for such leaflets, given that the vast majority of people using the CAB do so because they have problems of one sort or another (usually financial), not because they want guidance on matters such as life insurance, pensions and investments.

But he didn't respond which, at the very least, is somewhat rude and just goes to demonstrate the attitude of the FSA towards those it regulates. And so the culture of Us and Them continues.

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Nov 30, 2012 at 13:49

@ Phillip Melville - Absolutely! What advice does someone with £10,000 need???

Mr customer I used to get paid 3K for your investment which you ultimately paid for through charges, now Im taking the same amount up front for all this work I am going to do.

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Phil Castle

Nov 30, 2012 at 13:54

@ Julian - There are actually several MAS leaflets that are appropriate to have in a CAB, inlcuding ones on credit unions, lasting powers of attorney etc. The ones about LPAs have been particularly useful when my firm ran seminars for the local senior citizens forum as it was then not solicitor specific, just explained LPAs and encouraged them to speak to a solicitor about LPAs.

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Nov 30, 2012 at 14:53

Interesting article in the Telegraph on the SEC in the US. The boss there recognised that no matter how well it stamped out fraud and kept the FS industry in check, there would still be more moaners than supporters. So what would an FSA blogsite do other than cost twice as much to run as this one?

On the radio this morning, when asked why he did not agree with the set up by statute, a press conduct authority following the recommendations of the Levinson Report, an MP stated 'They did this for Financial Services in 1998 and look what has happened since. Fraud has increased and costs have spiraled'.

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Hugh Jars

Nov 30, 2012 at 15:09

@ Hickky

What would an FSA Blog-site do ?......

Give us a direct conduit to the heart of the Issues, so we could ''shoot where the ducks are'' as opposed to firing off probably useless rants and tirades about the big Grey Elephant, that they might/not read anyway, on these other Blogs

But Julian Stevens' reply to my fantasy ( greatly appreciated and succinct) has pretty much quashed any further expectation it might happen.

Anyway, - back to reality, and working out how much the recently announced FSCS interim levy is going to knock a broadside in my budget, : - ((

If only there was a sounding board at the FSA I could simply send a message - (with my real name on it) saying something like ' Thanks' and stand back and smile at them trying to work out whether I was being Sarcastic /Facetious/ Serious/ Ironic or simply TTP :-)

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John Brady

Nov 30, 2012 at 15:31

No matter how clear it is made to clients that they pay for advice not the sale of products they will still think that unless they accept the advice they owe us nothing.

What happens if the client doesn't like the advice after you have spent a week preparing it and researching it.

Clients will still want to see products recommended (OR SOLD) to them or they willtry to find some way of wangling out of paying.

My plan for 1st January onwards is to arrive for a second meeting with a client who doesn't want to pay an ongoing adviser charge armed with research, product key features brochures and suitability report. No application forms whatsoever, after all I am not the salesman for that particular insurance company.

Clients will read my report and then go online or directly to the product provider that I've recommended, it will make no difference to me whether they do the business themselves or whether they sit on their backsides and do nothing.........ADVICE HAS BEEN GIVEN. If they want to go ahead and need help completing the paperwork, that is an additional cost for my time.

Advice has been given, client has no reason to not like it because it will the absolute best advice that it can be with no commission bias, no company bias and no product bias.

By the way Mr Transactional and Not really committed anyway...........Here's my bill. WE HAVE GIVEN THE ADVICE THAT YOU SO DISMISSIVELY WISHED TO RECEIVE.

My advice costs money, don't dismiss it as though you're just entitled to it for free.

IFA's have a great chance here to make recommendations to clients, charge a fee then let the bank adviser do all the work.

No free first consultations, no doing unpaid work to try to sweeten the client into doing business with us, because it wont matter whether they do the business with us or not. WE HAVE GIVEN ADVICE.

Give the advice, write it down, charge a fee, let someone else do the business, then call the client the following year for a full financial review, encourage a complaint against the bank adviser that screwed up (which they will), then charge the client a fee for the full financial review.

I encourage every single IFA out there to never again take an application form for a product out with you to see a client.

The sooner clients get used to IFA's not arriving with a suitcase full of application forms the better it will be for all of us, JUST GIVE THE ADVICE and let the client do the actual transaction themselves or go somewhere else (like the bank) and pay again.

How good would it be to just provide the client with research areport and a bill. We might then just start to be treated as professional business people with the clients best interests at heart instead of near criminals.

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Julian Stevens

Nov 30, 2012 at 15:48

Which is why for the past 10 years or more I will do no pre-sale work for any prospective clients without payment in advance of a fee. Not a massive fee, but a fee nonetheless and, if they won't pay it, then my services are not available to them. Shouldn't we all have been doing it that way for at least twice as long?

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Phil Castle

Nov 30, 2012 at 15:48

@ John Brady - I agree with you. The FSA could have sorted this all out by instaed of getting so stuck up on the commission v fee debate they had focused on who the adviser is the agent of, i.e. the client in the case of the IFA.

What they should insist on is ALL instituations (including NS&I accepting the fact a client has a right to appoint their own agent and give them on0line access as well as the client to their systems so that they can economically and efficiently help the client by obtaining accurate information and advising them to.

Hargreaves Lansdowne etc could have done that if they had wanted to just as any otehr player like that.

Santander include an unsigned (information only) power of attorney authorising them to deal with a solicitor in connection with the mortgage. There is nothing in law to stop IFAs from doing the same, but the on-line terms of most providers prevent a client fro giving out their log in to another party and providers will not give a second log-in to their agent unless they sign an agency agreement with the provider.

This is why the system is flawed.

Advice and implementation should be seperate and many advisers now quote a seperate cost for each bit. the problem is as we know that that then starts to cause issues with predominance of intermediation etc and the follow on being VAT issues.

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Nov 30, 2012 at 15:52

@ Hugh

Do you hosestly believe that an FSA blog site would 'Give us a direct conduit to the heart of the Issues, so we could ''shoot where the ducks are'' as opposed to firing off probably useless rants and tirades about the big Grey Elephant, that they might/not read anyway, on these other Blogs'

The proposed site would be full of moans and groans to such an extent the FSA would get bored, or just as likley, tell themselves that the pain they are inflicting means they are doing well. Mind you, someone would have to correlate the statistics on how many respondants there were, what subjects, make a 1-5 analysis of how satisfied or disatisfied the bloggers were. Then appoint a 'director of blogsite' at a salary of £175,000 p.a. plus benefits. They in turn would have to report to a 'Director of Communications' and have their salary increased to compensate for the additional responsabilitiy. Perhaps a consumer blogsite review forum could happen fortnightly with ten members of the Civil Service all paid £300 per session, and a Chairperson at £500 per session. All these posts would also require a secretariat at additional cost.

So when we moan about these costs the FSAs reply would be:

'Well you asked for it, and we are on your side... Really we are! Oh, by the way, here is our additional invoice'.

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Simon Mansell

Nov 30, 2012 at 15:53

@Philip Melville Nov 30, 2012 at 13:41

"Can anyone tell me what is the problem with the RDR other than the removal of commission ?"


Otto Thoresen - CEO Aegon: "The RDR is only helping wealthy customers"

AXA April 2009:"We will lobby the FSA to make sure the RDR does not mean less are able to access advice"

David Cox - SuuqeaMarch 2009: "Two million clients could be left without an IFA after RDR - 40% could leave the industry"

Shaun Crawford, head of insurance advisory at Ernst & Young, 26/06/09 The FSA’s Retail Distribution Review will have the following effect: Of a population of over 30,000 advisers, many industry commentators are expecting at least a third to leave by 2012.

AVIVA Life marketing director David Barral has said the firm predicts by 2013 IFA numbers will fall to 10,000 in total as advisers fail to comply with RDR changes, leaving middle-market consumers unserviced. No surprise then that Aviva wants to grow its tied in-house channel to target 2.7 million ‘orphan’ clients whom were originally IFA clients. So much for consumer choice!

Robin Stoakley, Head of Intermediary Business at Schroders said, "I do see up to 30 per cent of the IFA market leaving".

Figures provided by Matrix-Data Solutions (in June 2010) showed there were 32,000 advisers in 2008. However, this plunged to 30,198 in 2009 and currently stands at 28,714

A study by Oxera during May 2010 showed that a quarter of advisory firms could leave the market.

Stephen Gay – Aviva June 2009: "The regulator has failed to consider the danger of adviser charging limiting access to advice for those on lower incomes"

FSCC January 2009: "Financial advice will be less widely available post RDR"

Institute of Financial Services: "RDR will impair financial advice before improving it"

Alasdair Buchanan Scottish Life November 2009: "Sales advice is a real cop out and extremely confusing to investors"

Lord Lipsey: "Consumers in the middle (not high net worth or money guidance fodder) to be sold products by banks under the contradiction that is sales advice"

Walter Merricks former Chief Ombudsman: "I think it would be unwise to count on the assumption that complaints from the retail investment world are suddenly going to go down as a result (of the RDR)"

Deutsch Bank report August 2009: "Dwindling IFA numbers in the lead up to the implementation of the RDR will have a dramatic effect on the UK life industry. It will have a negative effect on new business volumes for insurers. There has been industry talk of 30% or even 50% of IFAs exiting the industry post 2012, which is not impossible."

Paul Selly HBOS: "Bancassurers set to benefit"

Richard Howells Director Zurich LifeJune 2009: "The big question mark is still around what benefit it will have for the ultimate consumer. I am still not convinced that all of these changes, when you sit down with a consumer and explain them, actually give rise to a consumer benefit that I can really hang my hat on."

Martin Lewis Money Saving Expert June 2009: "There's a worrying possibility that the FSA is about to kill off independent financial advice in the UK for all but the wealthy. I do hope I'm wrong. I'm not convinced most people will want to pay for advice. The commission route has the advantage that you don't pay a fee each and every time you want information; you can go without the worry of laying out cash. What I find most galling though is that bank-based advisers - those primarily responsible for PPI misselling, endowment mis-selling, investment mis-selling and generally poor advice all round are still to be allowed to be remunerated based on the number of sales."

Janet Walford OBE, Editor Money Management Sept 2009: "I am not paranoid enough to believe that the FSA has a hidden agenda to do away with small IFAs, but the law of unitended consequences may well mean that this will be the result. This is especially the case when set alongside the myriad of other proposals that are costing some £430 million to set up, with ongoing fees of £40 million pa thereafter, a mind boggling amount of cash.

Peter Hamilton barrister, Source: Money Management Oct 2009, Scrapping the FSA by Marie Jennings MBE: "The Financial Services and Markets Act does not permit the FSA to cancel an authorisation simply because the FSA has changed its views on what the appropriate qualifications should be….It is one thing to impose new rules for new entrants to the IFA profession, it is quite another thing to disqualify someone who is already qualified."

David Hazelton of Tax Incentivised Savings Association(TISA) 30/10/09: The RDR could be detrimental to consumers both in terms of higher product charges and an increase in the cost of advice, warns the Tax Incentivised Savings Association(TISA). Implementation costs for the RDR are being "seriously underestimated" and product charges will consequently have to be raised.

Bankhall managing director David Golder 03/11/09: "We say write to the regulator, write to your MP. Do not let the FSA get away with some of the things that will lead to the widespread decimation of our industry."

Robert Kerr, head of retail distribution development at Scottish Widows says: The RDR could have the unintended consequence of "disenfranchising" the majority of consumers from financial advice. "Our key concern is the RDR proposals will act to drive advice upmarket, with financial advice becoming the preserve of the wealthy leaving mass-market consumers un-served,"

Nigel Waterson when Shadow pensions minister : "While no-one can object to raising the standards of training and competence, should an emphasis on exams take precedence over on-the-job training and experience? Is the 2012 implementation date practicable given the extra qualifications and changes in systems that will be required to be in place?

Richard Hobbs Director Lansons Regulatory Consulting 16/07/10: “I have to say, it (RDR) only just survived an executive committee meeting in March 2010 at the FSA. The FSA are not particularly proud of the RDR but it is a question of losing face, so I think they will carry on.”

Nick Cann chief executive of IFP 30/09/10 said: “The FSA must develop a “catastrophe strategy” in case it reaches June 2012 and half of advisers are not yet meeting the RDR requirements.”

Martin Lewis Moneysavingexpert.com founder 21/10/10 has echoed warnings the RDR will reduce access to advice. Giving evidence to the Treasury select committee Lewis said: “By the nature of what I do, I deal with a wide spread of the public. I worry that if you ask people to pay for financial advice, they will not pay.”

AIFA warned 16/11/10 that net fund sales would drop by £1.8 billion if the RDR caused a 10% drop in the IFA population. There is a danger that FSA’s RDR qualification requirements, and in particular the 2012 deadline imposed for achieving them, may result in a significant number of IFAs leaving the industry, thus decreasing consumer access to advice,’ said Aifa

in a paper on regulatory reform: http://www.aifa.net/publications/aifa_manifesto_for_regulation.pdf

Sarah Thwaites, Director of Products and Services at the Financial Services Skills Council, November 2010 issued a statement saying: "The danger is that if too few existing advisers meet the new qualifications level, or the industry does not find it cost-effective to offer advice to the mass market, the very important aim of achieving good consumer outcomes may be lost."

On 02/12/10 Julie Patterson IMA director of authorised funds and tax says: IMA says RDR won't cut charges. The Investment Management Association says it is “naive” to assume the FSA’s retail distribution review will drive down overall charges.

As part of the FSA’s recent platform consultation paper, the regulator said it would “be surprised” if annual management charges were maintained at current levels and suggested competition could lower overall costs. But IMA director of authorised funds and tax Julie Patterson says: “There is a slight naivety to this assumption. What the FSA does not recognise is this does not mean the cost for investors will go down. Yes, it will look as though the returns are better but the overall costs will go up. “There are tax effects - if the charge goes down, then the return on the fund is better, so there is more income to come on the fund. If there is more income, you will get a tax hit. Out of that taxed income, you will have to pay the adviser and those charges will be charged VAT at 20 per cent.” She adds that “other parties down the chain”, including platforms, may increase charges to cope with the burden of the RDR.

On 06/01/11 Richard Hobbs director Lansons Public Affairs and Regulatory says the FSA’s cost-benefit analysis of the RDR is “dubious” as it does not measure the detriment. He says: “What Sants’ letter does not attempt to measure is the detriment that arises from the savings gap and the protection gap. We also do not know how much extra detriment will be caused by the amount of advice declining, but we know that it exists. When you add that into the equation, the RDR cost-benefit analysis becomes a much more dubious proposition.”

On 27/01/11 Ernst & Young has compiled a paper on the impact of the RDR. It says banks would have to charge £200 an hour for advice just to recover their costs. Director of financial services (insurance) Malcolm Kerr says: “I am not convinced that the IFA brand is sufficiently well known among consumers to justify the additional risk and cost of the independent route.”

03/02/2011: Sarah Thwaites, director for skills and development for the FSSC, said there has not been enough time between publishing qualifications and the 2012 RDR deadline, and added there should be transitional arrangements. The first qualifications did not start coming out until later in 2010 and the final list of approved qualifications are just coming out now. What the FSA has done is start the clock from when it announced the no-regrets policy, but if you have waited to do the exam route you have not had much time. The FSA has failed to take the FSSC’s views on board. The FSA reaction was to write to the FSSC and warn them not to divulge information to the press.

26/02/11 Paul Farrow Daily Telegraph: “Driving Us To The Banks For Advice Won’t Work”, he said, “RDR is meant to mean that customers are treated fairly. I don’t see it. Any initiative that drives more consumers to the banks will simply lead to more PBA (poor bank advice).”

4th March 2010 Peter Smith FSA’s then Head of Investment Policy speaking at a Chartered Institute for Securities and Investment Private Wealth Management Conference in London, speaking about the potential for consumers rejecting the big idea about adviser charging confessed, "If consumers still do not want to engage with it then we probably will have to do something else.”

24/03/11 Friends Provident: Announced that the retail distribution review (RDR) has meant it is no longer viable to market or develop new investment products. In its interim results Friends Provident said the RDR meant that it would not actively market investment products and the insurer has concluded that the costs required to develop an RDR-compliant investment product and the expected margins on the products would not generate adequate returns for shareholders.

31/05/11 Paul Kennedy head of trusts and tax planning at Fidelity International said: There is a risk that investors will end up paying more tax on their investments which, coupled with the monster that is VAT, would leave them out of pocket.

29/07/11 AXA Managing director of UK distributors David Thompson warns product development may suffer in the run-up to the RDR as providers concentrate on changing their systems to facilitate adviser charging.

21/01/12 Research from Aviva claims that up to 3mn people will be unable to obtain financial advice and a separate report from Zurich revealed that half of advisers polled fear customers would not be prepared to pay a fee for advice. The FSA claims next year's changes won't make advice any more expensive.

The Scotsman, Page: 2-3

25/01/12 Regulation concerns: Analysts at RBS who are concerned about the impact of the Retail Distribution Review. They said that enforced deposit gathering by European banks and a UK ban on IFAs charging commissions could substantially alter the distribution landscape and demand characteristics of the European market for a long period of time. The firm cut its rating on Hargreaves Lansdown to a “sell“ from a “hold”. T

The Daily Telegraph, Business, Page: 7 Daily Mail, Page: 60 The Times, Business, Page: 43 The Independent, Page: 60 Financial Times, Companies & Markets, Page: 34

26/03/12 Prudential branded FSA as ‘ludicrous’ and ‘horrendous for consumers: In an email to 2,000 Pru employees, UK deputy chief executive Barry O'Dwyer said he had met the FSA and discussed its retail distribution review (RDR) treatment of legacy assets policy statement. Following this meeting he branded the Financial Services Authority’s (FSA) proposals for the treatment of legacy assets as ‘ludicrous’ and ‘horrendous for consumers.’ http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/insurance/9165070/Prudential-email-leak-mocks-horrendous-FSA-policies.html

22/11/12 Ernst and Young executive director Malcolm Kerr has said he stands by his prediction that the Retail Distribution Review will precipitate a drop of close to 30 per cent in the number of advisers in the industry, despite figures from the regulator this week showing just a 5 per cent fall.

Phil, you might find a few issues listed above?



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sol trader

Nov 30, 2012 at 16:12

Well, Well - just had my 6 monthly newsletter from the FSCS and the very pleasant chief executive states he will be trialing a new blog in a month or so.

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Hugh Jars

Nov 30, 2012 at 16:35

Sorry Julian,

I knew it would catch on, - if we tempted them with sarcasm, didn't think they'd react as quickly as this mind :-))

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Nov 30, 2012 at 17:34

@simon mansell

Very good ! Would you mind if I cut and pasted your reply for my own use?

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Julian Stevens

Nov 30, 2012 at 17:38

To Hickky at 15.52 ~ You're forgetting the extra section/s that the FSA would add to the GABRIEL returns They'd be sure to want you to record on just how many occasions you'd participated on their forum, on what subjects and whether or not you'd received a satisfactory response.

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Julian Stevens

Nov 30, 2012 at 18:28

A problem I foresee in the new year is that although there may well be a large number of orphaned clients loooking for a new IFA, a good many of them may have been sold, on max initial commission, Investment Bonds that the providers will refuse to alter to facilitate payment of an ongoing adviser charge. So the policyholders will find themselves being asked to pay fees which they may not be prepared to do.

The IFA who was planning all along to throw in the towel at Christmas 2012 certainly won't have bothered to explain adviser charging because he never had any intention of still being here to have to implement it.

As a result, those clients may well remain orphaned and, without regular reviews, their investments and other affairs will gradually yet progressively drift off track. They may never again consult an IFA. Is that a clever consumer outcome? I hardly think so.

One of the principal objectives of the FSA's RDR is to push the industry towards a healthier balance between sales and ongoing service. With that I have no argument. But it [the FSA] should have anticipated the scenario described above. At least two years ago it should have banned all the life companies, without exception, from accepting any new long term investment business on any basis other than with trail commission (and with the facility for it to be converted to an equivalent, switch-offable ongoing adviser charge), even if the intermediary submitting the business initially was adamant that all he wanted was max initial commission. I can't readily see how that might give rise to any issues for providers with changing systems on legacy products ~ ½% or ¾% annual trail commission, take it or leave it, which can be converted to the same level of ongoing adviser charge after 31.12.12. It's called planning ahead.

But, as we've seen on so many fronts, the RDR looks set to come into force on 1.1.13 with umpteen issues still not sorted out, for the simple reason that the FSA has failed to do exactly that.

Some may say it'll all come out in the wash but, for what my opinion may be worth, it's going to one helluva messy wash with all manner of unforeseen complications and snags. Still, never mind, the FSA's attitude is that you can't make an omelette without breaking a few eggs and the RDR is the FSA's biggest and smelliest omelette of all.

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Ian Lees

Dec 01, 2012 at 05:46

Julian - these are not " orphaned clients ", they are " Commodities", clients names and addresses owned by banks and insurance companies - to be exploited - by the commission hungry product floggers in the banking halls of TSB and other reckless money lenders. For the avoidance of doubt Scottish Widows at director level - claims " that customers of IFA's belong to them - the insurance company ", over riding the Trust and business relationship developed by IFA's and tied agents over years. According to Scottish Widows they purchased the client from you - the IFA - when you or anybody else sold your customer - a policy in retrun for receipt of commission at Scottish Widows. Commissions range from 100% of Lautro to 150% of Lautro - depending on the volume of busines placed - and the willingness of IFA's to agree with their local consultant - and Area Manager and promises made . This includes the trail commissions - under the Terms of the Agency Contract IFA's signed. Currently scottish widows are contacting TSB branches e.g Chelmsford - to alert the TSB branch employees to the surrender of policies - to contact the TSB bank client/ commodity - to assit them in the sale of another Scottish Widows product by intrusuion and interference - and to be involved in churning - with the knowledge of the FSA. Currently Scottish Widows has purchased access to ICAEW by sponsorship of this trade body and are exploitin gthis as they did in 1088 when they purchased - by sponsorship of trade unions and access to their commodities ( their client bank ) such as the e.g Electrical Contractors Unions etc., Broker consultants were engaged in attacking each potential company - and provide advice ( restricted, limited in product and market by advisers who were not authorised ).

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Philip Melville

Dec 01, 2012 at 10:13

@ Simon,

Despite such a very long response you have said absolutely nothing that does not involve commission and the presumed impact of its removal on the availability of financial advice because of the inability of advisers to adapt and prove their value to people of all socio economic groups.

Also the people you are quoting are not and have never been financial

advisers and are simply talking heads trying to protect their own vested interests.

If you have previously been advising these soon to be disadvantaged people surely you have the ability to explain how they have historically paid for your advice and how it has to be better for them to have your charges paid seperately to you.Or dont you think they were aware that you were being paid commission by the provider ?

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Duncan Carter 2

Dec 02, 2012 at 12:14

@ Phil Melville - Don't take the moral high ground, you've been around for quite a while and have used the commission route in the past.

I have as well but I hope we all recognise that it was - is - a poor business model. Needing to sell a product in order to get paid will always distort interests or at least create that perception.

I think what Simon Mansell is trying to explain is that the landscape is changing but there isn't much being done to educate the great unwashed notwithstanding what's going on within the industry.

None of us work for free, or have ever done - as we move to a profession we need to extol the virtues of value by putting client's interests first and demonstrating this. Infighting isn't going to help.

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Philip Melville

Dec 02, 2012 at 13:58


I dont have any moral position and am just interested in what is going on in this industry.

I really dont think it matters how we get paid so long as the public are given the opportunity to properly understand the process.

And by the way what arrogance calls its customers such names as the great unwashed and yet expects them to understand our problems.

I had a very succesful career selling insurance products on commission and cannot understand the sniffy attitude of todays asdvisers to what was until recently the only way you could make a living in this industry

I dont think it was a poor business model because thats all there was at the time and the current moral high ground hadn't even been thought of and nor had the notion of being a so called profession.

We sold insurance for a living and by and large our customers were better off from our work.

I find it hard to reconcile the pompous drivel coming from financial advisers which attempts to denigtrate anyone who does not have capital ripe for churning.

As far as removing commission denying the masses financial advice is concerned I wonder what it is that would be sold to them from todays provider product menu that will not be available in future.

For a number of years providers have gradually removed all but capital products from their active commission paying lists which is incidentally how the adviser community came to think of itself as investment advisers.

So what will change other than the task of justifying your charges for ongoing churning ?

Our job is providing financial advice not commission selling so if we now how to learn new and different skils to get paid then surely as our job is financial advice we will not have too much problem justifying ourselves to whoever we choose to be our clients.

If you cant justify yourself and your charges to your clients then maybe you either need to learn some new skills or start making for the exit.

Nearly as long as Simon but my own words.

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Duncan Carter 2

Dec 02, 2012 at 14:23

@ Phil Melville

So commission was/is alright then and its removal in the RDR per Simon's comments [and your condemnation of his] wasn't actually misplaced?

Churning - eh?

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Philip Melville

Dec 02, 2012 at 14:49

It was neither right or wrong as there was no option available to either advisers/salesmen or the public

I may misunderstand you but no I think the time had come for change in the industry and the main issue always seemed to be the " commission hungry salesman " thing so why not get rid of it and move on.

Incidentally there was a report in the FT yesterday detailing the almost 30% increase in investment bond sales this year although I am sure that this will only have come from SJP,the Banks or Andrew Fishers lot. - ?.

I didn,t condemn Simon but I did ask for anything other than commission which was wrong with the RDR and all he did was repeat his oft stated list of things he thinks will go wrong when commission goes.

Happy for you to have another shot !

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Philip Melville

Dec 02, 2012 at 14:51

Sorry you mentioned churning . I guess this is otherwise known as researching better alternatives for someone's money on the basis that you will get a better return - oops I should have said get the client a better return.

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Dandy lion

Dec 02, 2012 at 15:03

It's taken me 20 mins to read this lot and its quite depressing and meandering.

Basically the thread is about this chap (geale?) being unqualified and having a crap cv, right? Well. I've met many ex double glazing salesman pretending to be advisers with allied crowbar and I'm sure a lot of this lot are still around with other "high quality", quasi whole of markets tied companies (we all know who I'm talking about!). So give the guy a break, he doesn't sound like he hates us all does he?

Second thread seems to massive rants about RDR and the demise of UK financial services. At my firm we have been ready for some time and honestly had no problems bar a few tight clients who perceived it was free, and guess what, who's fault is that? We have had to re-educate them and explain it was never for free but the previous adviser didn't make it clear. We also have to have the guts to say "goodbye" don't we? The fsa guy probably underestimates the number of clients who won't be able to afford advice but he's not far out. I've just quoted a guy 3pc to do 4 money purchase transfers to our wrap but nothing for his isas. I told him that I was not prepared to take the regulatory risk for nothing and he completely understood. We did the isas transfer for free because the previous IFA took 3pc and I wasn't prepared to charge him twice. It was a candid conversation between two adults with all cards on table and we both left satisfied. He signed our new (white - I don't believe in this gold, silver bollocks) client agreement and off we went.

All the fsa want is for the punter to know what we are doing for a given price and to ensure itssuitable for them. It's seriously not complicated.

Now come on, stop moaning and crack on finding those great clients not wanted by the retired, exam repellent pensioner Ifas and banks!!

Happy Xmas to all!

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Duncan Carter 2

Dec 02, 2012 at 15:06

''So what will change other than the task of justifying your charges for ongoing churning ? ''

Over and out!

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Ian Lees

Dec 03, 2012 at 09:16

Churning is the new name for switching - one product for another - used and abused, but on the whole for the better for the client. At Scottish Widows - whilst insolvent - we were churning product form other insurance companies - a strategy applied by reckless Directors - to build the company from insolvent to nearly solvent - which surely must be good news for a client. Churning takes many forms - and the monitoring of it difficult - more especially with poor administrations seuch as Scottish Widows who are well known for poor administration. Is this by design and strategy - or just incompetence and negligence ? The real reason people are moaning is those in charge of governemtn and the FSA/FCA - refuse to listen. People form outside the industry applying their techniques - then leave for those who are committed to pick up the pieces. Gien the huge salaries bonuses and pensions - this could be some form of Bribery or illegal payments legitimised by the COnservative Governemtn - to their chums LOL.

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Dandy lion

Dec 03, 2012 at 09:18

I tell you what will change, instead of being salesmen the financial services industry will gradually realise that client retention and client focus will be what runs your business. Too many ifas try to be fund managers instead of financial planners. If you really understand what your clients long term goals are, agree a plan and maintain that plan using careful cash flow planning then this is a values service they will pay for. If you prevent to be a fund manager and try and outperform banks etc you will I eventually have unhappy clients because these things are not within our control. We have segmented our clients into two groups; full financial planning for those who are willing to pay, whether this is via fund based or monthly retainer is irrelevant.

The 2nd group gets sent a menu of fees which they have to pay if they want something. Trust me when they phone and request a valuation and get charged £35 or something, they will either "walk" or agree to be in category one, probably paying a monthly retainer as they won't have enough invested capital to go on fund based. My junior adviser will deal wth them.

Because you no longer have to offer this category a "service" you can really focus on retaining your profitable clients and getting new ones like them. Duncan, so what's changed is the old idea of offsetting or cross subsidy ie because you earn a lot from your bigger clients you can afford to virtually give it away to the smaller ones. I feel empowered by this and look forward to sending sem clients to their banks for "free advice"!!

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Dandy lion

Dec 03, 2012 at 09:22

Apologies for typos. I'm in the sun and can't see what I'm typing!

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sol trader

Dec 03, 2012 at 09:43

to Dandy Lion - re your first post. You raise an interesting point which has been troubling me. "All the fsa want is for the punter to know what we are doing for a given price and to ensure itssuitable for them" Talking to a DFM friend and reading on the FSA website, to provide regulated advice you need to take into account everything the client has invested. But what if they dont want to pay for it?

Also, I wonder if a client turns off a trail fee, to what extent is our liability also turned off?

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Ian Lees

Dec 03, 2012 at 09:50

Get out of the sun - and under an acacia tree . . .you " Dandy Lion ". I agree with Phil about remuneration. Bonuses like commissions are reward for effort and work conducted. The problem with them is theri abuse. They are the stick and carrot at insurance companies - becasue of ( a ) faulty business strattegy ( b ) the ability to use them to realign the various contracts e.g with profits and unit linked - to provide a balance ( c ) to be used to generate artificially, certain types of procudt e.g life assurance critical illness endiowment or pension business - which distort the markets in the medium to long term ( as has happened e.g Scottish Widows paying 150% of Laitro Standard Life 130% of Lautro up to 180% of Lautro - Insurance Bonds paying up to 8% commisions.

A simple maximum commision rate which applies across the Board - would solve the issues. It is up to insurance companies to manage their contracts and contract terms but we have seen the misuse of with profits funds to bolster the short term earnings - feigning competencey e.g Scottish Widows with theri limited range of contracts - endowments and pensions ( before the purchase of Clerical Medical for their Ins Bonds and Estate Planning for which they have failed to attract new business) . Insurance companies have a lot to offer - and have failed theri agents and their clients - and appear to believe they can do the job of an adviser - by replacement of their limited and restricted services ( with big players such as banks and tesco ) - continuing with the old style unworkable system of direct selling. The internet will do a much better job than any olddied in the mould insurance company - filled at Board level with the deadwood of yesteryear. Please be advised I have specal knowledge of the workings and activities at Scottish Widows ( now LloydsTSB ) as I worked for them and have - what is often referred to as " inside information ". I quote becasue of knowledge and experience - and for no other reason.

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Simon Mansell

Dec 03, 2012 at 10:02

@Dandy lion

You said "I tell you what will change, instead of being salesmen"

We are all salesmen and women and if that ever chages the industry and the UK will be at a great loss!

The salesman links results with remuneration, a rare association in the UK today where so many receive benefits irrespective of success or failure (consider £20m bonus paid to FSA in 2008).

In is my belief based on 28 years that contrary to the views of the chattering classes the consumer does not hold the fee charging professions in high esteem at all! The salesman - succeeds or fails on a daily basis and every transaction between two human beings is a sale!Commission wans't an invention (like RDR) but an evolution based on the premiss that intangible products are sold and never purchased.

"It is my profound belief that a salesman succeeds or fails on a daily basis and must justify his position every single day of his working life.

Therefore that salesman must also be in a state of perpetual anxiety, the healthy anxiety that makes one reject complacency."

Source: Jacques Maisoneouge

Former Senior Vice President IBM

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Phil Castle

Dec 03, 2012 at 10:03

Whilst I do think Ian goes on a little too much about LTSB, it doesn't mean I don't agree with a lot he says and i particular his post of Dec 03, 2012 at 09:50.

As many have said, a maximum commission agreement imposed by the FSA would have been much more appropriate than the commission ban they have brought in. I know the OFT would not allow a maximum commission agreement many years ago, but the FSA enforicng a maximum commission agreement should have been no more unacceptable to the OFT than a maximum agreement. A maximum agreement of NIL is still a maximum agreement (unless of course it is non advised or from anotehr EU state, in which case commission can still be paid!) How anti competetive is that!.

a maximum of 0 is still an agreement to limit, just as a maximum of 3% would have been. How much better it would have been had the agreement been max 3 plus 0.5% and then if the adviser needed to charge more for lowere volume business, then it would have had to have been by an invoice from the client.

adviser charging is actually worse as there is NO limit as to what can be applied, it could be an adviser charge of 40% and to some extent, can the FSA do anything about that now?

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Graeme Ferguson

Dec 03, 2012 at 10:15

@ Phil.. you say there is no limit? But have a word with the FSA on appropriate fees, then look at how Networks are applying that thought!!

If a firm is now not tracking time for every job, forget pricing a job, Firms will need to be tracking the actual time so that they can compare to the fixed price they charge...if they can't demonstrate fairness then I think they may be in trouble

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Dec 03, 2012 at 10:15

If you had a maximum commission of 3 + 1/2 then what would happen? Every client would get charged 3 + 1/2 no matter what. If you want to charge your client 40% then go ahead and try and justify it to them, they will realise that this is an explicit cost now and it will be up to them to agree it based on the service you propose to offer them.

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Phil Castle

Dec 03, 2012 at 10:27

Barman - Yes, that's what I meant. Some people however woudl end up paying less than 3 plus 0.5 as advisers may agree to reduce the figure for larger cases.

it woudl effectively have meant a sort of "decency limit" of 3 plus 0.5, with anything over and above that figure charged by direct fee (no adviser charging through the product) which would have made greated scrutiny easier for the client and the regulator.

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Dec 03, 2012 at 10:35

Phil, the point I was making is that everyone would charge the same no matter the work involved. Removing product commission allows the adviser to say to the client, look this will take me xx hours and therefore cost you £xxx. Thus removing the product from the cost of advice.

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Ian Lees

Dec 03, 2012 at 11:10

Providiing customers with sound financial advice is not about " How much each individual is willing to pay ", it is about the cost to advisers - with an element of profit, in addition - and the goodwill we build into our business practices, for my customer over the long term. Advice goes hand in hand with peace of mind. The peace of mind only a trusted adviser can provide - built up over a long time, yet detroyed n an instant by tardy advisers flogging products from various sections in society. These salespeople hunt out one off opportunities for themselves ( or theri companies ) rather than look at their prospects - entire situation. 30 telephoen calls - 10 appointments - and 3 sales, with reports and recomendations designed to meet their ssale - cover many aspects of compliance for that one off sale.

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Dec 03, 2012 at 11:11

@ Barman

If the FSA has done as you suggest, clients would get a better deal, charging would be explicit, there would be no product bias and fortunes would not have to have been spent by advisory firms and product providers. If advisers want to charge more, either as initial or ongoing fees, why not force them into charging the client via invoice or regular direct debit? Investment houses will also be limited to the total cost of their services and all fees, including those still hidden, should be explicit. Seems sensible to me and when the full disaster of the RDR adviser payment regieme becomes apparant, with tens of thousands of advised clients being categorised as dormant, who will bet that the 3+1/2 max commission will not be approved in a few years by the FCA?

It is the actions of the guilty and greedy amongst the FS industry that has led our current arrogant and inept regulator down this ill thought out path. So many will suffer even poorer returns, left stuck in ill performing investments, poorly suited to their current needs and risk attitudes, whilst being unwilling or unable to pay for sensible advice.

Online help will either mislead or misadvise a fair number of these unfortunates as an ability to understand all the nuances of an existing plan is one of the key abilities of an adviser. Most decision tree based advise is flawed because either the promoting company will skew advice to help its own sales, or the decision tree would have to be so complex that it will be much to much for many policyholders.

But the FSA led us down this pathway, the road ahead is littered with inconsistancies, queries and doubt.

The pity is the FSA will be abolished before they have to answer for these shortcomings. But for services to client poverty, Hector Sants will presumably get a knighthood in the New Year honors!

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Terence O'Halloran

Dec 03, 2012 at 15:02

@Philip Melville @ Duncan Carter 2

Commission is recognised internationally commercially as the cheapest way to bring any product to market. Direct sales is one of the most expensive.

‘The great unwashed’ as a number of people have referred to them are indeed great in number but not unintelligent in managing their finances through trusted advisers (including the man from the Pru –‘the debit’.

The majority of correspondents in this long string, which I have enjoyed reading, refer to “£10,000 investments” or “£100,000 investments” and that really is to ‘miss the point.’

Of the three Study Groups that I belong to I am in the minority because my primary focus in any financial planning relationship centres on life assurance and pension provisions. A few of my clients are multi millionaires. The last statistic that I saw verified some 384,000 people with personal value excluding their home, of more than £100,000. Indeed, only approximately 1% of the population earns more than £100,000. They are not IFAs.

RDR’s pursuance of educational excellence cannot be denied however the overarching banning of commissions for life assurance (which in my book includes Whole Life Assurance, a fundamental requirement of anybody and everybody) is a misdirected ‘consumerist’ own goal.

Come with me to Chris & Emma, a thirty eight year old with a twenty one year old wife (sorry partner) with a two year old little boy Harry. Spend two and half hours of chargeable time at £187 an hour plus staff time on top at £75 an hour in order to place two £7 per month Family Income Benefit policies delivering £10,000 per annum tax free income over the next nineteen years and you might then get a proper perspective on commission and IFA time cost.

My firm has never taken indemnity commissions and has been fee based for the last thirty years. @Philip Melville: you live in a rarefied world Philip and I am pleased for your success. There are thousands of Financial Advisers who struggle to make a living in their enthusiasm to deliver good service and advice. To denigrate the public @Duncan Carter is to do Financial Advisers a mis-service and completely misjudge the general public.

This nonsense simply has to stop. The problem as we all know it is indemnity commissions paid on regular premium contracts. Tthe Maximum Commission Agreement would have dealt with that in no uncertain terms. It is time to go back to that agreement and view it logically. It took three years of determined during well informed negotiations to get to the Maximum Commission Agreement and the same socialist, ‘state control’ biased overbearing regulatory regime did for that through the OFT as it is doing for the current situation.

The insurance companies, particularly those owned by banks do not want IFAs in the marketplace because IFAs monitor and adjust their market to the products providers produce.

Most of the investment managers and finance houses do not want IFAs because, similarly, IFAs monitor and moderate the fund managers’ marketplace. What they don’t realise is the more IFAs that are in the marketplace the more the inter provider movement is smoothed.

When you have been responsible for overseeing death claims, as I have, when you have seen a widow buy her own house and bring her four year old daughter up on her own without recourse of going to work through a Family Income Benefit policy, then you can start pontificating about commissions.

Perspective is what is required in this discussion and understanding that the vast majority of the public seek a voice they can trust and a payment system that they can afford, preferably within the contract and that in doing so they can not only protect their own position, their families and responsibilities, but also provide for their retirement in dignity.

State control is not the answer and the blind rush to a pure fee basis, rather than having those fees be paid through the contract over time is a folly that once introduced will be difficult to repel or repeal.

RDR is an ideological remedy for minority ills but ignores the psychology of selling and the consumer accounting process of buying.

In simple terms, Chris and Emma would not be able to afford the £7 a month premium for each of their Family Income Benefit policies and my £700 fee, £74 of which will go to regulators and the regulatory process. Most of the balance will not cover my overheads. Fools and paradise come to mind.

Terence P O’Halloran BSc FCII AIFP

Chartered Financial Planner aged 68 RDR compliant.

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Ian Lees

Dec 03, 2012 at 15:27

I will soon have finished Terrence O'Hallorans books Molehils out of Mountains ( or was it the other way round ? Maybe I read it back to front ? - whatever I have nearly finished colouring it in. I recomend this book for the ideas it develops - and the benefits advisers bring to clients. It is dissapointing that the FCA will destroy advice for millions of consumers - many of whom are unconcerend about any commission paid - are awareit comes form their investment - in level recorded manner - which the FSA and FCA are intent on destroying - to replace it with waffle and incompetence.

Advice wil only be available for those with salaries in excess of £ 80,000 or have a minimum to invest of £ 1,000,000. Single parent will lose out - their children will lose out - and if catastrophe strikes - and the single parent dies - who is going to finance education or assist with the childs upbringing. The FSA has re introduced the poor house for millions of people - it just needs Dave and his government to get his chums to build them LOL

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Phil Castle

Dec 03, 2012 at 15:48

I like Phil Melville, but I agree with Terry with regard clients of the example he gives.

Whilst protection business doesn't come under the RDR commission ban, those of us who have dealt mainly with those in the age group 20 to 45 & earning between £20 and £100k per annum realise that FIB and whole of life policies along with regualr premium pensions are eseential to the future wellbeing of people in these situations and life and pensions have to be SOLD. Removing commission kileld regular premium pension business and will do the same for protection if we are not careful.

90% of my business is now investment and pensions (not regular savings of anytype), but it could have remianed regular premium protection and pensions and probably should be only as most of my business comes by referrrals, I seem to keep getting more investment and pension business.

Ian is quite right, you familues will loose out and the state will to as it will have to pick up some of the tab, but it will be the basics. Worse of all simple things like Trusts for life policies will not have been established unless the FSA does something sensible like making it a requirement that insurers offer term assurances ONLY written in Trust, so the client decides on the policy by it's name rather than the provider taking responsibnility for advising on Trusts.

The retail distribution review was well named in that it is all about distribution, NOT about what is best for the client.

The in the shape of Hector Sants and Sheila Nicholls in particular told the TSC (on the record) that "simplified advice" was an essential part of the RDR and yet it has dissapreared completely. Withtout simplified sales (it should NLOT be callsed advice), there is a MASSIVE flaw in RDR.

A lot of people think I a was anti RDR, but if you google what I have said since 2007, I have ALWAYS said the RDR had laudable intentions, but the Retail Implementation Plan was never forumlated. Those who read the FSA papers back in 2007 will remember there was suppsoed to be both a REVIEW and then an implementation plan.

With no plan, you plan to fail, which is pretty much what happened in teh aftermathe of the second Gulf War. The slight difference is that there was a plan, but it wasn't implemented.

RDR is and remains a mess. We have no choice, but to either 1. "give it a chance" as Mr geale says, or 2. leave now. The TSC gave the FSA a chance to follow their advice and take a one year step back and actually formulate a workable plan instead of implementing piecemeal a package of unconnected ideas, which the RDR (with no RDIP has become)

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Chris Geeson

Dec 03, 2012 at 16:18

It is with a deep sigh that I enter this blog for the third time but the thread has meandered up hill and down Dale until we have reached through to unintentiona consequences again. Fall out if you will and its not a pretty list

Poor people

middle class people

Slightly upper class people

Insurance Company people

Independent Financial adviser people

All the above are getting less post RDR than before, for many their job has gone for many their career has gone and for almost everyone their choice has either gone or is much diminished. As a concept RDR is great but now all and sundry are getting a swipe at the end result some bits being over thought and some being underthought with some areas of very little thought at all.

I still come back to the original blogs of several years back that noted all RDR would acheive is growing a relatively few advisers Ivory Towers very high indeed. The deluge of denial is awaited with more than some sadness it must be said

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Dec 03, 2012 at 17:05

Anyhar, back to the topic:

"FSA's Geale urges IFAs to ‘give RDR a chance’"

Well Mr Geale, after 108 comments (so far) I reckon you have an answer.

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Julian Stevens

Dec 03, 2012 at 17:46

As somebody mentioned early on, the RDR isn't exactly optional is it? In view of this, "urges" seems to be an interesting choice of word. It's more a case of JFDI or else..

On a slightly different though definitely related note, a wide range of estimated percentages seem to be knocking about as to how many IFA's aren't going to have cleared the Level 4 qualifications hurdle by the end of the year ~ I read today that Aviva reckon it may be as many as a third, though that seems to be a bit extreme. At the other end of the spectrum, I read of the FSA talking it down as low as just 5%. The actual figure may turn out to be around the mid point of 19%, which is still pretty worrying when added to all those who plan to throw in the towel voluntarily.

The result, come the New Year, may well be a severe shortage of available advisers, though I remain of the view that adviser charging, particularly when provider-facilitated, will not be a significant deterrent to those who need advice going to see someone who, from January next year onwards, will be obliged to spell out exactly what the costs of his services are. We cannot, I submit, be a profession if everything we earn is paid by the providers whose products we recommend.

Commission of itself isn't bad or even a bad system but too many people have taken too much commission for too long, very often by taking advantage of customer ignorance. The only way to eradicate that is to replace it with Adviser Charging.

The biggest threats ahead, as I see them, are:-

1. endlessly escalating regulatory costs,

2. relentlessly increasing regulatory interference in how we run our business,

3. the costs of compensating clients in the wake of yet more regulatory and provider failures being dumped onto a dwindling IFA population,

4. the lack of any longstop,

5. the lack of any accountability on the part of the regulator,

6. the lack of any curb on the regulators' budgets,

7. the absence of a clear, firm and unequivocal undertaking from the new regulator that there will be no more hindsight reviews and

8. lack of investor money and investor confidence.

This is a formidable array of challenges, but I still maintain that people won't be put off consulting a good IFA because of Adviser Charging ~ unless, of course, itsms 1 to 7 above combine to force our charges so high that we'll simply become an unaffordable luxury for Middle England, the very people who need us most.

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Simon Mansell

Dec 03, 2012 at 18:27

@:Phil Castle Dec 03, 2012 at 15:48

I agree with Phil. The investment content of whole of life will drag them into RDR - end of product!

We already have a living (terminally il)l example of what RDR will do to regular savings. Consider Stakeholder pensions. As Phil reports he seldom "sells" a regular premium pension and I would suggest this will be the same for most on here. That is apart from Philip Melville (sorry Phil)

Market data shows that fewer personal pensions are now being sold via advice to individuals quite simply because there is no provision for the cost of advice within the Stakeholder charging structure and many client have an aversion to fee payments.

In this sense SHPs have not worked in consumers’ interests as they have restricted the availability of advice and fund choice. The resultant market contraction has meant that some consumers who should be saving for their retirement are now not given the advice and access to personal pension products that they need. - without funding there is no fund!

And hey guess what - the regulators looked at this historical mistake and decided to extend it across all other products! Insanity is doing the same thing over and expecting a different result!

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Dandy lion

Dec 03, 2012 at 18:59

Terence has totally blown my exam repellant pensioner argument! Well done Terry, but do me a favour, sell your clients and play with your grandchildren!

Its not going to be as bad as you lot are making out and if you have built up a decent business you'll be fine. I fully expect to lose some clients, lose some fees, but in the words of Obe won Kinobe, " they'll be back, and in greater numbers". Don't you get it? The public, the press, the regulator, the govt, all hate us!! Very hard to believe I know but sadly its true. We are viewed slightly above double glazing and just below estate agents.

If we ban commission then at least we can look forward to no more "commission hungry advisers" headlines again. Commission has led too many down the wrong path and f@cked up too many clients. It's gone, get over it, look your clients in the eyes and tell them what your gonna do and what it's gonna cost. If they leave they will only find another ifa saying the same thing and they'll be back, "and in greater numbers"!

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Ian Lees

Dec 04, 2012 at 08:39

@ Dan die Lion - what an isulting person - to Terrance O'Halloran - who has served more people well, in insurance, and his local community - written books on various subjects within the professional insurance fraternity - yet he is subjected to such a lack of respect by someon e who clearly does not know much, or anythiing - about the subject he is willing to slur. Such a lack of respect by someone with an exam under his belt - and less competence in his head - is the new breed of " adviser ". Unlike a Lion - who operate within a " Pride ", he or she clearly has no "pride" in the work previously carried out, the on going work of truly respectful people - who actually - treat their customers with care across a wide spectrum - looking after consumers, cusotmers and colleagues alike - with respect, with pride and with the utmost care.

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Ian Lees

Dec 04, 2012 at 08:55

@chris geeson - great blog ! That is the use of " Restricted ", limited - limited to people limited to insurance companies - the reduction of service - treating the customer who IS left - with care . The direction of the FSA and their newly reborn child the FCA - are hell bent on reducing advice, the quality of advice, in particular the quantity of advice. By dumbing down advice - like education, like the NHS - thousands of incompetent managers will cost billions of tax payers money ( £ bn's ) - to provide a redcied service, with reduced competition, by the few - to the few. Now that is a CON servative strategy. I wonder who is sponsoring them ?

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Dandy lion

Dec 04, 2012 at 09:25

Ian, it was a tongue in cheek comment and not meant to be insulting. If it came across like that I apologise; to terrence. Your rant however was very odd and I suggest some prosac may be helpful, threatening death is somewhat extreme Ian.

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Terence O'Halloran

Dec 04, 2012 at 09:48

Hi everyone, I took @Dandy lion's comment as a tongue in cheek comment; it brougtht a smile to a heavy debate.

It is, however, nice to know that I have a defence league, Thank you @Ian for being my champion. No Prozac needed.

There are serious concerns and many seek to trivialise the RDR impact. Many good advisers will be lost in this rush for even more state control of what should be a free market open to all.

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Ian Lees

Dec 04, 2012 at 09:54

Dear Dandie - your comment was not tongue in cheek it was in writing ! an insult a slur ! and an apology to Mr O'Halloran is in order. With regard to my email there was no death threat, merely a reauest that such intolerable behaviour should be removed as in " the death of a salesman ", or the termination of such rude and unhelpful comments made without knowledge - but are derogatory, defamamatory and a defamation of character - of a committed person of high repute - by some illogical, derranged indidual - who refuses to conduct theri scripts by using their own, or his/her proper name.

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Philip Melville

Dec 04, 2012 at 10:32

@ Terry O' Halloran,

Sorry old friend - and for my part I still think of you as a friend -but I most certainly do not live in a rarified world. Proclaiming a hair shirt mentality may not be my preference but my business has never sought to differentiate between different economic or social sections of the population.

I would like someone to tell me what they are currently doing in financial services for the " great unwashed " that they will not be able to do when they cant do it for commission ?

As you well know the range of regular premium products which pay commission and which were traditionally starting points for people with small resources, is very very small these days and as one would not expect the " great unwashed " to have ever had sufficient capital to interest todays churners I do seriously wonder what activity is to be prevented by the lack of commission when there are so few suitable products available.

As to illustrating points with fee levels which would never have been acceptable to most of the population I dont understand why this is supposed to help.

Of course we have to charge people but like any other business we will have to scale our charges to our marketplace and just as in the days before indemnity commissions we had to find ways of building our income so we will have to do similar things again.

If anyone is to blame for the lack of potential activity for some sections of the population then it can only be the providers. Most providers have totally failed to move their business methods in line with the rest of the world and consequently are now unable to provide suitable products in a profitable manner so have withdrawn from the low end product marketplace.

By all means point out the problems brought about by regulation but please dont dump adviser incompetence on the wrong shoulders.

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Dandy lion

Dec 04, 2012 at 11:07

Ian, I did apologise don't you read anything or are you too busy banging your head on your padded cell wall?

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Philip Melville

Dec 04, 2012 at 13:07

Well the silence is deafening as the saying goes.

Is there not one of you with a response concerning the great unwashed and your services ?

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Ian Lees

Dec 04, 2012 at 13:15

Dear Leon - I thought your were jsut apologising to me ? I enjoyed the reark you made about " my padded cell ", I have only one cell - which is neither padded nor restricted - it is a brain cell - just the one ! I also have just one nerve - and you are getting on it !

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Dec 04, 2012 at 13:27

@ Phillip

I believe it was the 1st Baron Lytton, victorian novellist and politician that gave the world the phrase 'the great unwashed' and his 1839 classic:

True, This! -

Beneath the rule of men entirely great,

The pen is mightier than the sword. Behold

The arch-enchanters wand! - itself a nothing! -

But taking sorcery from the master-hand

To paralyse the Caesars, and to strike

The loud earth breathless! - Take away the sword -

States can be saved without it!

Quite apt for this day and age!

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Dandy lion

Dec 04, 2012 at 14:09

Ian, good one, lets call a truce, I'm sure everyone is bored by now

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Philip Melville

Dec 04, 2012 at 14:31

@ Hickey,

I hope that came from Wikipedia and is not something you actually knew ?

These kinds of expressions are repugnant to me and say more about those who use them than the people they hope to denigrate.

Until providers gradually turned the industry into asset gatherers by focussing their commission arrangements on capital sums we had reason to be proud that we made a difference through our work.

Arrogance and pomposity were just not a part of this industry when you had to be able to create wealth or organise protection from the what if scenarios that we all face.

There is a very good quote from a sadly deceased revered Rugby League commentator called Eddie Waring who said that " the row is rarely about what the row is about "

I am not at all surprised that no one has tried to answer my question because the reality is that the fuss is actually about having to justify the income which has been taken for a number of years for simply moving money around in circles.

The very idea that the negative contributors to these and other blogs ever had experience of dealing with ordinary people and persuading them to put aside small sums for the future or to buy protection so that their loved ones would be safe if they died unexpectedly is laughable.

The great unwashed are just a convenient excuse to try and retain commssion on the only activity most now know which is churning in all its wonderful machinations.

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Terence O'Halloran

Dec 04, 2012 at 15:08

@Philip Melville – In many ways you are right Philip. There is a dearth of regular premium contracts by and large brought about by a dearth of people selling those contracts. And they do have to be sold. Median earnings in the UK per household are around £26,000. That is with one and a half to two earners.

As I said, we have never taken indemnity terms, therefore the personal capitalisation of our business has had to fund work into the future for some four to five years. Fees take on a different perspective in peoples minds but I agree with you, the principles of Fee Pac which I produced over twenty years ago and have installed in quite a number of Financial Advisers officers, can be geared to wholesale regular premium activity but it just makes the psychology of the buying process much more difficult for those on their own perceived tight budget.

The perception appears to be that Accountants, Solicitors, Architects and so on are purely fee orientated but they are not. The 2½% to 4% commission that is paid to Solicitors for Probate is far in excess of the fee that I charge for the same service. The Architects commission on installed capital items is no different to the recommendation of a particular life assurance or pension product. The FSA concentrate on perception not fact.

Facts go like this:

Not one provider of stakeholder pensions has made ‘a red cent’ in the last how many years. I gave three lectures in amongst the most renowned of pension providers and told them all, before stakeholder came into being, that they would not make any money. It was a fool’s errand and so it has proved to be so.

The only reason indemnity terms came into being was to allow sales forces to grow. They were loans by the Institution and I have always felt that they were wrong; but then again, they were loans and the organisations that received those loans could well have applied to the banks for the same financial facility.

When the public get a piece of paper at the checkout at Tesco’s telling them what the gross profit is on a tin of beans, I shall feel that there is justification in my telling my clients what my gross profit is on what I do for them.

Professionalism is a state of mind. Unlike many I am not in denial about RDR. I merely look at its timing and its potential effect and the effect that regulation has already had on an industry that had 230,000 registered individuals in 1992 and now has 30,000 soon to be reduced to something of the order of 20,000.

Some people see the sun rise as the start of a new day. Others see it as an appalling impediment as they drive towards it with wet roads and a clear sky.

RDR would be more acceptable if those who had designed it, and are now in charge of implementing it, had the level of experience and qualification that they are demanding of those who serve the public.

At the Lincolnshire Show, if a butcher was to judge the best in show animals there would be uproar. Those who are responsible for RDR at the Financial Services Authority and the other organisations that seek to judge those who purvey our professional skills must be academically and experientially competent to do so.

They are not and that is my biggest complaint; because their ignorance is set to deprive 95% of the population on those median earnings adrift in a sea of obfuscation.

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Terence O'Halloran

Dec 04, 2012 at 15:32

By the way Philip, you do not honestly believe that the RDR will in anyway reduce churning? That is naive to state the obvious. It will encourage it. Think it through.

I sent my annual analysis of my client activity to the FSA - to illustrate, to them, how a fee based practice works.

Two thirds of the accounts run negative - income over expenditure - every year.

Cross account profitability is essential to survival.

The FSA ignored it. No response. As a strategic financial planner I can assert, that from my experience that is the 'norm' for most business models.

Fees are not utopia. Churning has always been the way to earn a living for those without new custom to pursue. O’H & Co added at least 10% per annum in new custom to counterbalance about the same exiting their retainer because their work was done. They still kept touch and remained on our database. Churning is hopefully a minority activity and the absence of commission will not reduce its incidence.

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Hugh Jars

Dec 04, 2012 at 15:33

@ Terence O'H

Quite right on all points made.

You are right about the shortcomings of the FSA too.

Not only do they generally lack the experience, academic qualifications and nouse which could be expected, to be able to regulate 'US', they are lacking in other areas which leads me to smile at the history and meanderings of this blog thread - (125 and counting !)

Much has been implied by advisers referring to the general public as the 'Great Unwashed'


I received a confirmation letter this morning from the FSA (regarding a very significant issue to my business) and you know what ?.......the author had typo'd my name, .....so scribbles it out, and writes my surname handwritten in a horrible scrawl in blue biro next to it......

The sort of offence for which you would probably shoot your staff if they had sent it to one of your clients...

So in terms of changing Financial Services landscapes, my perception

( which is my reality) is that the Great Unwashed' as far as the FSA are concerned are IFA firms... .

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Philip Melville

Dec 04, 2012 at 16:04


In my humble opinion the demise of regular premium contracts has come about because providers are ineffecient that the overall reduction in charges brought about by the Stakeholder concept has made it impossible for them to operate these products profitably.

And yes I do think that the transparency of the adviser charging process and general media comment will make churning very very difficult going forward although no doubt the usual sharp boys will find ways around things.

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Terence O'Halloran

Dec 04, 2012 at 16:46

@hugh jars your conclusion is perfect.

@Philip I can say nothing more!

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Ian Lees

Dec 04, 2012 at 17:17

To Dandy - Line drawn under . . . . an movin' on . . ..

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Ian Lees

Dec 04, 2012 at 17:28

In my opinion - however humble RDR will not stop churning. The reason beingthat churning is the result of insurance companies investment companies and DFM's and IFA practices and tied and restircted agents - wishing to increas the volume of funds under management. Commision is one incentive but there are more. Churning also increase competition - keeps those that want funds on their toes. The Financial Condom authority ( prtoection unit ) will only allow certian types of people to purchase certain types of products and other cetain types of funds. Direct sales companies managed to increas their " new business ", except most of it was churned new business e.g Hambro Life and Allied Dunbar . . .where Whole of Life policies were changed each year to " offer better terms ", ( not premiums )> Scottish Widows discovered this when copying products and changed their Endowment Plan 10 ( WithProfits Policy ) through various stages to the Versatile Endowment Plan. The 60% commision was in addition to the attraction of the new business figures - fiddled to give the impression they were attracting " new business" - the reality was it was the same okld business - being churned. One of the greatest proponents - The Leeds Building Society - prior to purchase by Halifax ( proponents/ salesp people of Standard Life ) - and now TSB ( owner of Scottish Widows ) . Then there are the pensions Retirement Annuities, personal Pensions and Executive Schemes - ( the various unions Electrical Contractors etc., then stakeholder - now ! Auto Enrolment - now sponsoring chartered accountants and offering Scottish Widows Direct - So where is the protection ? where are the Rules behind treating cusotmers fairly ? Over to you Mr Wheatley. RDR - the restricted distribution review - it isn't even a review !

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Julian Stevens

Dec 04, 2012 at 17:47

I'm just in the process of advising a client to switch the value of his Skandia Life PP6 into a Skandia Investment Solutions CRA and, apart from our continuing trail commission, I'm taking not a penny for it. It's the best thing for him to do so, having been with us for the past 15 years, hopefully he'll be with us for another 15 years.

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