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Deloitte: RDR will leave five million without advice

by Alex Steger , Michelle Abrego on Nov 07, 2012 at 08:14

Deloitte: RDR will leave five million without advice

Research by Deloitte has found that over five million clients may be left without advice as a result of the retail distribution review (RDR), as costs are made transparent and IFAs focus on higher-net-worth customers.

Deloitte's report said the regulatory changes and their impact on the advice market would leave five and a half million clients orphaned or without access to advice.

It said: ‘These changes mean that there will be five and a half million disenfranchised customers who will either choose to cease using financial advisers or lack access to them.

'These customers, who account for 11% of UK adults, will represent a significant post RDR advice gap.’

The survey, which canvassed over 2,000 UK adults, showed that 46% of adults that bought savings and investment products over the last three years did so through financial advisers.

The research showed 87% of bank adviser clients believed the advice process was free and in the future less than 2% of customers who have taken multiple forms of advice would be willing to pay a one off fee of £300 or more to an adviser.

According to the research 33% of adults with less than £50,000 in savings, and 32% of those with more than £50,000, indicated they would cease using advisers for all products if they were charged directly.

Deloitte also found 27% of individuals were likely to opt out of advice and 32% said they would rather do their own planning, research and administration, as a result of the RDR.

While the mass market stands as the most likely to exit with 2.4 million people expected to stop using an adviser, 2.5 million mass affluent customers were also predicted to exit the adviser market, alongside  600,000 affluent clients.

IFAs were still in a good position, said Deloitte, since they tended to occupy a more upmarket space servicing clients with cash savings of more than £100,000.

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70 comments so far. Why not have your say?

Michael159

Nov 07, 2012 at 08:38

'87% of those client's believed the advice process was free....'

That says more about the IFA than the client.

Where a gap in the market is created it will not take long before someone fills it.

Change isn't always bad. It if gets rid of the IFA that sells 'free advice' and enhances the level of qualification then how can that be a bad thing.

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Hugh Jars

Nov 07, 2012 at 08:41

''research showed 87% of those clients believed the advice process

was free'' ??

2 questions spring to mind;

1; What standard of commission / fee disclosure did those clients receive when getting the advice, to have a perception that the advice was 'free'

( leading on to how the hell did they think their adviser made a living?

2. If the disclosure is so poor as to leading 800 clients out of 2000 surveyed to have an unclear picture of how their advice is paid for, then god help us.... The Survey should dig a level deeper, and name and shame the firms who gave that advice...

Or, are 800 clients just simply stupid? I think not

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Compliance Bloke

Nov 07, 2012 at 08:41

Good work, FSA.

You destroyed the Industrial Branch. I know their products were poor value, but at least the man in the council tower block had *some* life cover. Now he has none.

You tried to reduce the pensions gap with stakeholder pensions that you pay into at the checkout in Tesco (other supermarkets are also available). That meant that advisers could no longer afford to sell a £50pm stakeholder because the commission (apologies for the foul language) wouldn't cover their costs and ad-infintum regulatory responsibility. So the pensions gap increases. (And the wealthy grand-parents investing in stakeholders for their grand-kids get to hide more money from the Chancellor.)

Now your lovely RDR proposal - under which an adviser needs to be virtually degree qualified in order to be able to advise on an ISA or small pension - means that advisers have to follow the money and chase the high net worth clients, leaving the man in the street at the mercy of the cretins in the banks.

Didn't anyone see this coming?

Oh, yes, that's right - WE ALL DID but you refused to accept the inescapable logic, preferring to continue with your ill-conceived and destructive plans.

So now you will create a generation of 'ordinary' people who have insufficient life cover, insufficient savings and insufficient pension planning. People don't buy these things, they MUST be sold / advised and you're taking that route away.

On the upside, the money that people don't 'waste' on life assurance and pensions etc can be used more effectively by buying pointless consumer electronics. Maybe the high-street will get a boost and re-start the economy.

Good luck with that.

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John Phillips

Nov 07, 2012 at 08:41

There was no need to perform a survey to be able to state the bleeding obvious. Why is it the FSA are so blind to the unintended consequences of there actions, or are they?

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The Rumpo Kid

Nov 07, 2012 at 08:41

Who, over the last three years, will have led clients to believe that the advice they'd received on savings and investment products was free?

Now, let me think...

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Richard Anderson

Nov 07, 2012 at 08:42

I'm staggered that in the world of disclosure 87% of customers still thought the advice was free. Just what explanation of costs and charges have those people been given?

We still keep coming back to the same concept - 'mr client, you can invest your full £100,000 and the product provider will pay me £3,000 from this, or you can invest £97,000 and pay me £3,000 directly. which would you prefer?' why is this so difficult?

Are there still 'advisers' out there who perpetuate the myth that the £3,000 comes from the product providers' own coffers?

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Michael159

Nov 07, 2012 at 08:50

Compliance Bloke

Strictly speaking the Diploma is the equivalent to the 1st year of a degree course.

As for why we need to have higher qualifications, the FPC was a level 3 exam which is about in line with a high grade GCSE or A-level. You are advising on people life savings and retirements. How about putting you have a GCSE in Financial Advice on your business card and see how impressed clients will be.

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W K Clark

Nov 07, 2012 at 08:58

I agree re the disclosure issue, who is actually not telling their clients the costs? I find that hard to believe.

But, I am sick to flaming death with this constant garbage trotted out about not being able to service the mass market. I for one am an old Home service adviser, I prefer to work in that market, personally I find the majority of HNW clients a pain in the derriere to work with.

As a small IFA with low overheads I am happy and confident that I will continue to deal with the mass market and make profit, if the rest of you don't want them send them my way.

As the majority of IFa's are small firms I would bet that most will keep their mass market and keep servicing them, there simply isn't enough HNW to go round, so sorry Deliotte your assertion is utter horlicks!!!

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Adam Smith

Nov 07, 2012 at 09:00

And Mr Anderson nails it. My question is this: within a given asset class, what are the chances of you picking a product that is going to perform more than 3% worse over its lifecycle than the most recommended one (NB not the best one)? If you can demonstrate that there's a high probability of that happening, then you can show your value as an adviser; if you can't, then why shouldn't I just stick a pin in the list myself and save the money?

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Hugh Jars

Nov 07, 2012 at 09:01

having already posted a comment, I just thought to myself ...

Deloittes? why are they surveying consumers, and predicting changes in the behaviour of over 5 million people ......

they don't offer advice ( unless I am mistaken, and if so I apologise for my oversight)

what they do offer is due dilligence / mergers & acquisitions etc....

Are they not simply throwing a grenade in the room for Financial Advice firms.. and trying to create panic and therefore increased activity in M&A 's

If so, they should stop being so devious,

Are their Consumer Survey results and data available for public inspection?...

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Compliance Bloke

Nov 07, 2012 at 09:04

@ Michael - I've provided compliance and T&C services to over 1,000 advisers over the last 18 years or so. Some have turned out to be rogues and I've removed them from the gene pool. The vast majority have been honest, hard-working IFAs. Not one has become a better adviser solely as a result of passing an exam.

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another IFA

Nov 07, 2012 at 09:08

Before even reading the other posts my initial reaction was "what???". The only clients I will see saying goodbye are the ones who always take up alot of my time and then do nothing so as far as I am concerned this is good news. It's never been a free service- RDR has come way too late- the majority of IFA's now are qualified to a seriously high standard, my clients,and I am sure other IFA's will resonate with this- come to understand that every move they make financially needs to be a considered decision-there is no one size fits all answer to every situation- if the public want fair treatment and good unbiased advice then unless they do all of their own research, sadly they have to pay. We offer a first interview for free and often for people with straightforward questions, what they really want can be resolved without formal advice, because most people just need to understand more.

There is an old story regarding Picasso who was asking a huge payment for a painting he had completed in a short time.The potential purchaser asked how he could expect to get that much and the reply was that the time it had taken reflected a lifetimes experience which had enabled him to draw something so good so quickly.

Well done Deloitte anyway- goodness knows who commissions or is paying you!!!

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Michelle Abrego

Nov 07, 2012 at 09:09

@Michael159 @Hugh Jars

Just to be clear, the 87% of customers was referring specifically to those who received advice from a bank adviser. It's now been clarified in the story, sorry for any confusion.

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John Phillips

Nov 07, 2012 at 09:13

Banks are among the least trusted providers of financial advice and will be hardest-hit when the Retail Distribution Review forces them to begin charging fees, research from Deloitte suggests.

According to the Deloitte survey of 2,000 UK adults, only about 3 per cent of customers who use a bank adviser would be willing to pay a one-off £300 fee. Moreover, 87 per cent of surveyed customers who bought a savings or investment product at a bank in the past three years assumed the advice process was ‘free’.

Although more people use bank advisers than IFAs - about 14 per cent said they go to an IFA for advice - the percentage of those willing to pay an IFA was closer to 9 per cent. People were most willing to pay for advice from an accountant or solicitor, although fewer people use them.

More than half of respondents said bank advisers are too sales oriented and just over a third said they do not trust advisers working for banks and building societies. Additionally, only 28 per cent of respondents think that bank advisers are as skilled as other financial advisers and they are generally seen to add less value.

Because banks are traditionally more active in the mass-market, Deloitte predicts they are likely to lose a greater percentage of their customer base.

This could explain why banks have been pulling out of the advice market recently. Royal Bank of Scotland, for example, announced in June its intentions to cut 600 people from its financial planning unit.

Lloyds has also been among the banks to back out of mainstream advice, revealing in September that it would stop offering advice to those with less than £100,000.

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Michael159

Nov 07, 2012 at 09:14

Times have moved on. Like doctors, accountants, teachers etc they all have to do exams. Time we move on and up our standards.

An Accountant walks into the room with this ACCA or CIMA followed by an IFA with his GSCE/ A-level in financal advice - who do you think has more credibility with the public?

I don’t disagree with you that there are some good IFA who are not very well qualified but that is not the way of the world now.

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another IFA

Nov 07, 2012 at 09:15

and excuse the cynicism but using the words "bank" and "adviser" in the same sentence leaves me cold. It still leavesthe Deloitte review seriously lacking in initiative.

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Hugh Jars

Nov 07, 2012 at 09:21

@John Phillips you have obviously read the FT Adviser article on their page this morning ..... about Deloitte's..... which you quote from above....

this highlights my previous point / post....about people being selective with detail in their article....and throwing in grenades....

The NMA author (Alex Steger ) has published an article which is about the same news, but incredibly different, to the FT Adviser article....( which clearly would not cause angst in the IFA community, simply ensorse what we all think about the bank advisers) ....

so Deloittes' are spewing forth questionable 'Data'' and it appears the NMA Journalist Alex Steger is being totally provocative and wasting our time...

time to permanently sign out from NMA methinks

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John Phillips

Nov 07, 2012 at 09:22

The above blog from me came from Michael Trudeau FA Adviser.

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Matthew Timmins

Nov 07, 2012 at 09:25

87% believed the ‘advice process’ was free. This was probably because they considered the initial meeting and fact finding process to be ‘free’. I am sure they understood that once they purchased something the adviser got paid and they, through all the disclosure rules and documents, must have understood that they were ultimately paying for this. Depending on how you word the question you can always drive the results you are looking for.

Whilst we are all talking about statistics we are missing he obvious point. Any and every purchase starts with a ‘problem recognition’, the need to do something to solve a problem. This could be hunger, thirst or the need to save for the future. Unfortunately we do not act on long term problems in the same way we do short term ones and most of us need that extra ‘push’ to do something about it. That comes from an adviser approaching or being recommended to a client and that client believing they can chat about their problems or needs without incurring a bill for every minute they spend with the adviser.

Without the ability to receive commission, fewer advisers will seek to serve the mass market and less of the population will seek advice.

Couple this with FSA’s view that manufactures and distributors can exist in silos, without the need to reward each other for the services they provide, and we have a fractious and unhealthy market. I can understand the need to make commissions more transparent but the fact is we have gone from a system that offers consumers choice as to how they pay, to one which dictates they must pay by their less favoured route. A real backwards step in my opinion and once with has far reaching consequences on the financial health of the nation.

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Dogman

Nov 07, 2012 at 09:33

There seems to be this moral position that many advisers seem to take where they feel bad for not being able to provide advice for the low level mass market, and blame the big bad FSA. However how much time and money is spent servicing these largely 'loss leader' clients, whilst being cross-subsidised by the more affluent clients that still need to be advised post RDR?

Personally, I do not see the inability for mass market to pay for advice as being a problem - sure there will be an adjustment, and there may even be temporary drop in turnover, but in the long run this has to be good for our industry? There are enough resources, e.g. Workplace pensions, comparison websites, Martin Lewis, etc who can at least help to point people in the right direction if they are confused about financial planning. Alas there will always be apathy and ignorance, but is this not the case with most things in life? You can lead a horse to water.......

Think about legal advice - how big has the legal industry become with the 'no win no fee' generation? If it was a 'win or no win, you pay us a fee', maybe we would not have anywhere near as much litigation as we do! When will solicitors have to start disclosing the true cost of their legal advice in this instance?

Our industry is just professionalising - there will no doubt be IFAs that drop out over the next couple of years because they cannot cope, but unfortunately this is a natural evolution. However RDR is not changing things as much as we seem to think - most investments now are initial charged (reduced allocation), insurance is still going to be commission based, and pensions are largely upfront charging now with most providers. At least now we can have a formal servicing arrangement with our clients, of which we can charge an ongoing fee/percentage, and they will know what to expect no and in future. It has to be a positive thing for the people who REALLY need the advice...

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Barman

Nov 07, 2012 at 09:42

can we please change the record now and move on with business...

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Julian Stevens

Nov 07, 2012 at 09:51

As always, the results of this survey depend very much on what questions were asked and how those questions were framed.

If the central question was just: Will you be prepared to pay fees for advice, the response from many participants who've not been asked to pay them before is pretty predictably going to be No.

If, on the other hand, the question was: How do you feel about commission from investment products being replaced by a defined Adviser Charge that will still form an integrated element of the package but with the size of that charge being subject to your agreement instead of you having little if any say in the matter, as is the case at present, I imagine most respondents would consider that to be a definite and positive step forward. On what grounds wouldn't they?

I think this just scaremongering and that dispelling the myth commonly peddled by bank salespeople that their "advice" is free will do no harm at all.

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John Phillips

Nov 07, 2012 at 09:53

It just goes to show how different we all are: there are those who think being highly qualified, by being able to remember information and regurgitate it onto an exam paper, are better than those who just get on with the job and continue to expand their knowledge as they go. An exam is only a means to test what a person can recall not what the information and knowledge they have and what it can do for their clients.

I have sat in many meetings with solicitors and accountants and have marvelled at the lack f basic knowledge they have in the field of trusts, IHT probate etc etc. There seems to be a breed of brainiac’s who think without a few letters after your name you are not worth listening to or you are inferior to those that have “qualifications”. Who would you put your life into the hands of, the latest qualified up to his armpits consultant or the guy with 30 years experience successfully treating your ailment?

I do not and will not give advice on anything I don’t know inside out and upside down and would go up against any adviser with my recommendations and reports for clients. No matter what I think I know I revisit all legislation and considerations each time I go back to a certain subject just to make sure nothing has changed. I speak to HMRC and read the relevant and latest papers on the subject under review and work on the premise that the last thing in the world I would want to happen is for a client to say to me “how could you have got it so wrong”. In 22 years of advising clients this has yet to happen. I’m FPC qualified, didn’t go to University and don’t see the added value to my clients of me being level 4, 5 or 6 qualified. Perhaps I could charge them more if I was? But it wouldn’t make me a better advser.

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Keith Cobby

Nov 07, 2012 at 10:01

I don't think anyone should be surprised at the level of ignorance out there.

Millions of people participate in a 'get rich quick' scheme every Saturday night!

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Ash Littlewood

Nov 07, 2012 at 10:02

To Matt Timmins

The question is though do clients understand that commission is funded via their product charges or do they think Product Providers pay it out of the goodness of their hearts? I dont think they do/did.

I think there was a big educational piece required here as I believe clients see commission as a Provider cost and not their own. I think if clients had fully understood how commission worked and were provided with clearer explanations then there would have been less of a cloud over it.

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Jonathan Kirby

Nov 07, 2012 at 10:07

Well said John Phillips.

Some of the biggest idiots I have ever come across have very impressive qualifications but no nothing about the real world.

Oh, and just remind me what the qualification for being an MP is????

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Telford MS

Nov 07, 2012 at 10:09

'Oh I wish I'd not studied and passed that exam.'

With more years in the business than many this is a phrase that I have never heard, not once.

There will always be those who can't be bothered.

Oh, and fair or not my 10 year old daughter has just failed her 11+, try telling her exams are not important, but of course that's different.

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Michael159

Nov 07, 2012 at 10:12

@John Phillips

You sound like a very good and considerate IFA that puts a lot of effort in. However, come January, no matter what your experience, those in power have determined that you are not qualified enough. You will simply not be able to give advice because your GCSE/A-Level in Financial Advice will not be sufficient.

I cannot argue with anything you have said but times have moved on (for better or worse).

If there were more people like you then maybe we wouldn't need to have more exams. However it would appear you are not the majority.

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Bob Donaldson

Nov 07, 2012 at 10:25

Whlst clients of the bank advisors may have thought the advice was free, the answer depends on the way the question was worded Deloittes.

Often individuals are quite happy for the cost of advice to be an inherent part of the product they purchase. Many people that approach the banks are actually looking for a home for their money, redundancy, pension tfc, inheritance etc, not necessarily advice on the whole gambit of financial planning. They are generally looking to purchase a product.

When they believe the advice is free it should not be assumed that they did not know the advisor was receiving commission or being paid by the provider but they accepted the advice was costed into the product they bought.

Even if the advisor did not specifically point out the commission they were being paid, if the individual failed to read the documentation given at point of sale then they have themselves to blame.

We should stop beating up advisors when it is often buyers of products don't read what is given to them or they implicitly put their trust in advisors.

Do you trust everything a car salesman or double glazing salesman states. Know if you have any sense you will do a bit of research and shopping around. Why should it be different with financial services.

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Hickky

Nov 07, 2012 at 10:28

So if you asked the persons advised by a bank if they thought the bank was being paid you would have got a different response. 99% would have said 'hell yes'.

If you went into Dixons and wanted advice on what the best TV is to suit your needs, and the sales adviser helped you make up your mind, is this free advice? Public perception would probably say yes. However you would be advised to buy the TV with the biggest spiff on it. (for spiff, read enhanced commission).

However, with the demise of Comet, their main price competitor on the high street, the in-store pricing is likley to become less competitive, but you can at least touch the TV, and have someone with some basic knowledge of stock and performance to steer you away from the most unsuitable product.

If you buy on-line, you get no advice, but often buy the wrong item by looking at specifications only. But it is often cheaper, but the website does not say 'the sound quality is rotten' or the picture is muddy'. Most online help is dominated by remarks from interested parties, either for or against.

So are customers so nieve to think the retailer does not earn from the sale? No. Gross profit from the sale of a TV is the difference between the wholesale and retail price and is really no different from commission. If you said to a customer looking for a TV that the price was the same online as in the store, but if they wanted independant advice on what to buy, an extra £30 fee would be paid to the consultant, how many would pay? Same answer for IFA advice.

So this 'survey' is flawed, the conclusions invalid, the reasoning behind the commissioning spurious. Just think of an adviser fee as insurance for the client that almost all advice is fairly suitable. Enhancing qualifications as a method to ensure persons giving totally unsuitable advice should have known better, therefore demonstrate their lack of ethics.

Mind you, a better outcome would have been to ban the spiffs!

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John Phillips

Nov 07, 2012 at 10:33

@ Michael 159

You’re not wrong Michael, but it is the few that have caused the many to suffer and as to why the FSA have come out with the proverbial sledge hammer to crack the nut. If you look at the statistics for the IFA sector v Banking sector it would be hard to see why there is a need for heavier regulation in the former in the first place.

However I am fully aware of the failings of some IFA’s but again these are the ones who will have no trouble obtaining level 4 and keeping their respective business alive. Many are going to still hide their fees / commissions in jargon and trail; this will lead to poor returns for clients and the industry as a whole being brought further to it’s knee’s. With the prospect of continuing volatility and lower returns for investors the respective cost of 0.5% & 1.0% trial will be unsustainable, so companies planning a business model of 1%+ are going to find client leaving them in droves. There will be more HL type firms springing up and less and less advice being sort, thank you FSA for bringing B&Q to the world of financial advice.

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Michael159

Nov 07, 2012 at 10:44

Bob because our peers are not car salesman or double glazing salesman! Many people don't understand what they read so they need help, hence they are coming for 'advice'!

We should not be salesman. Sales men sell products. We should be advising on the right course of action. My mum was 'sold' a product that was totally unsuitable and lost thousand. She asked questions about it but because he was a good 'salesman' she bought into it.

Goodness me! The quicker RDR comes in and gets rid of lazy salesman the better. We should be an industry that people trust and respect. From what my friends and colleagues say, people don't trust or like IFAs and many fear they will be sold stuff they don't want or understand. Like it or not, we need to up our game and improve our image. We do that by doing exams and charging for advice not for selling products. Yes John Philip’s is correct doing an exam does not guarantee you a good adviser but until a better system comes in that is all we have got.

I don’t know John Philips (the comments above) but that is the sort of IFA that we risk losing because of RDR. If we lose all the lazy Financial Sales men the better the industry will be.

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Arthur Schopenhauer

Nov 07, 2012 at 10:57

Its all been said but who is listening??

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John Phillips

Nov 07, 2012 at 11:17

@ Michael 159

My clients aren't loosing me as I’m going "Continental"

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The Rumpo Kid

Nov 07, 2012 at 11:22

@ Arthur Schopenhauer: A very post-Kantian stance.

I think Foucault sums up it up very well:

'People know what they do, they frequently know why they do what they do, but what they don't know is what they do does'.

Sound a bit like our friends in Canary Wharf doesn't it?

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Philip Wise

Nov 07, 2012 at 11:28

Millions of people who thought that they were getting advice but being flogged a product now won't have access to people lying to them in the same way as they used to. Instead, they will have to go to a new type of liar, who either works for a product provider or who only gets paid the 3% plus 0.5% adviser charge if you buy the product he is flogging.

Some organisations dont employ good enough liars, to follow the new lie, so they are lying about RDR pushing up the price of advice, as an excuse for getting rid of the poor liars they used to employ.

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Hugh Jars

Nov 07, 2012 at 11:31

@ john phillips

what do you mean by ''going continental?''

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Philip Melville

Nov 07, 2012 at 11:55

I wonder who commissioned the survey done by Deloittes - product providers scared about losing control over distribution ?

The only losers in this scenario will be those advisers who dont have the ability to change and adapt to new conditions.

The public will not lose any sleep over the demise of advisers and other mechanisms will come about which supply the needs of people who advisers cant be bothered to serve.

You can either spend all of your time whinging about the regulator or you can move on and work out how to make a living from providing what the public wants at a price they are prepared to pay.

If you dont want to make that effort dont worry about the poor public because you can bet that someone will make the effort and reap the rewards..

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Arthur Schopenhauer

Nov 07, 2012 at 11:56

@ Rumpo

Luke 23:34

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John Phillips

Nov 07, 2012 at 12:18

@ Hugh Jars

Sorry if I told you I'd have to shoot you afterwards :-)

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Arthur Schopenhauer

Nov 07, 2012 at 12:24

@John Phillips

Is that compliant??

If so I have a number of potential situations to apply the remedy to

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What Planet am I on today?

Nov 07, 2012 at 12:24

Telford MS said Nov 07, 2012 at 10:09:

"'Oh I wish I'd not studied and passed that exam.' With more years in the business than many this is a phrase that I have never heard, not once."

I have taken and passed several CII exams, and - listen up Telford - I wish I had not studied and passed them. Without exception they were a complete waste of time and money. And the quality of the syllabus and the training material was usually appalling.

11 GCSEs, five A levels and an Economics Degree ought to have been enough.

As always, exams are simply a Rite de Passage. Having studied, passed and earned the "Rite" (sorry!) they give a lot of writers on here the excuse to flash their egos. That is the primary function. Getting the best quality financial advice across to the maximum number of people in the most efficient and cost-effective way has been made more difficult, not less, by the RDR fiasco.

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John Phillips

Nov 07, 2012 at 12:34

@ AS

Yes it's completely compliant to shoot another IFA just look at the FSA's advice on how to rid the country of these pests. Bring back hunting I say.

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The Rumpo Kid

Nov 07, 2012 at 12:36

@ Arthur.

Some will forgive; some will forget; some will forget to forgive; some will forgive but not forget.

Some of us older ones will just forget...

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Hugh Jars

Nov 07, 2012 at 12:53

@Michael Phillips;

When you said ''you were going Continental'' I'd assumed you meant ''Radio Rental'' which applies to most people participating on Blogs....it's a disease of the mind,

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MP

Nov 07, 2012 at 12:58

The statement "RDR will leave five million without advice" is clearly false.

People will still be faced with financial decisions so they will seek advice from other sources. Many will come to rely on the financial press (who will have a field day will all sorts of generic examples and idealised portfolios) and many will rely on advice from their friends (many of whom may be equally ill informed).

The issue is therefore not the lack of advice but more the applicability of the advice that people will receive in future.

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John Phillips

Nov 07, 2012 at 12:59

@ Jam Jars

Whose Michael Phillips?

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Barman

Nov 07, 2012 at 13:09

If 5 million people are currently recieving advice and paying c.3% for it, and will no longer pay the same 3% for it going forward, does this not shine a light on how charges have been disclosed or described in the past?

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Hugh Jars

Nov 07, 2012 at 13:13

@John Phillips,

He's that top American Swimmer isn't he? :-))

Told you it's a disease of the mind, -)

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Duncan Jones

Nov 07, 2012 at 13:14

Why should we care? We did not make the rules and as Darwin's theory goes we all have to adapt to survive. Furthermore we ARE commercial undertakings and NOT charities. So we have to change the message slightly (actually tell a client everything we do for them AND charge them as well). Probably wave a tearful goodbye to some and say good riddance to others. So what you are left with will be your business base for 2013. If you know where you can add value and communicate that effectively you WILL survive and ultimately thrive. The industry will transform into a profession and our status should skyrocket. This is not advice utopia but advice reality. See you all in the New Year I hope!!

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stephen haythornthwaite

Nov 07, 2012 at 13:31

erm for those who looked at the 87% statement ref: thinking advice was free and prclaimed, which IFA's gave this advice, it also states these were BANK clients.....

So no surprises there then.........

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another IFA

Nov 07, 2012 at 13:36

@MP

reading this with great interest this morning (when I really should be working!)

Yes you are absolutely right-just had a conversation with the daughter of one of my clients who can only afford to save £30 a month. She cannot afford the fees we charge but does need advice on fund choice for her pension, money management, all kinds of stuff. I have been able to give her loads of information and point her to the Money Advice website but there will be a huge gap where people with not huge resources need advice and not selling to,

Ive had many a client in the past who has told me what the financial press say as if the press were gurus and knew what they were writing about ( as opposed to picking up snippets and pulling out a point from it)- the real truth is that if it were so easy advisers would not have to train to the extent that the Chartered or Diploma requires- I appreciate the comments from Telford MS but most of us don't have that academic background- some of the exams are odd I agree but they do provide the food for thought to help you think things through when advising clients.

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John Brady

Nov 07, 2012 at 13:44

Re: Michael 159

I think you'll find that 87% of BANK Adviser clients think that advice is free not IFA clients. I'm just amazed that 13% of bank adviser clients don't because 13% are not disclosed to, also of this 13% that dont think it's free how many actually know how much it is ? they might know it's not free but that doesn't mean anything.

Re: Compliance Bloke.........Advisers wont sell products anymore, so they will charge a fee for a different array of services.

After 31st December why would an adviser physicallly sell a product ? Why would an adviser think along a salesmans lines and put themselves under that sort of sales and targets kind of pressure.

I have no intention of ever physically selling another product in my life to a client or new prospect.......... I am an ADVISER full stop.

I will take a clients needs, wants, requirements, ambitions, attitude to risk and tax status and make a recommendation on what products to buy, what bank, insurance company, direct fund manager, platform or other organisation to buy them from and in what funds to invest. This will be made in writing along with my bill.

A clear message will be made to each new client that a rebalancing exercise, another apppointment to reassess risk and a new fact find will cost the client a new fee.

If the client wants further advice they will pay for it.........again, if they want a second opinion they will pay another advisor for it. If they need help completing the paperwork or online applications etc.....they will pay for it.

If the client ignores the advice because I am not there to hold his/her hand and do everything for them they will have already paid for it because they will be paying for advice NOT A PRODUCT. If they dont act upon the advice that's not my problem.

This is the way forward, many new clients wont accept it but nothing is free, there will be no free first appointment so that prospects can suss you out and then waste your time.

If you ask for an appointment with me you will be told of my charges and then it's up to the prospective client, if they say no well then I'll say find somebody else's time to waste, I'm sure if advisers stick to this instead of being greedy and trying to screw each other over we'd all get a fair share of clients.

If clients know from outset that charges will be made immediately they will be more likely to ask for advice in the future. If they can ask for 20 advisers opinions they'll get 20 different answers (all for free) and still wont do anything about it.

I'm going to be an adviser not a sales orientated pain in the ass, every appointment I go to will be succesful because every apppointment will result in advice being given and I will get paid for advice given not sales made. No more waste of time prospects who are just trying to get something for nowt whilst you know all the time they will go and invest in the bank after they've spoken to you.

I'm looking forward to it.

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Philip Melville

Nov 07, 2012 at 13:57

@another IFA,

How short sighted and arrogant not to accommodate a clients daughter. Just wait until Mum and Dad find the new advice process to be more useful than you !!!

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Christopher Petrie

Nov 07, 2012 at 14:06

No-one can be really sure how things will pan out from 1 January. What I do know is that umpteen times in the past very large firms have - at nice fees to themselves - run "surveys" and *predicted* future industry changes, all of them turning out incorrect..

I have no doubt whatsoever that this latest prediction will turn out to be as wide of the mark (in whatever direction) and as useless as all the rest ever were in the past.

Mind you, this one predicts IFAs will do ok, all the ones from years back said IFAs would all be gone by now. Maybe we should be worried this time......

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another IFA

Nov 07, 2012 at 14:11

@PhillipMelville- I work for an IFA where we have set fees for our work. I don't feel its fair to ask a lady who cannot afford fees to make the commitment of becoming a client- its not fair surely? Hells teeth I spent alot of time giving her information how dare you say thats arrogant?

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Michael159

Nov 07, 2012 at 14:21

Re: John Brady

The article was updated since I read it.

See comments above

@Michael159 @Hugh Jars

Just to be clear, the 87% of customers was referring specifically to those who received advice from a bank adviser. It's now been clarified in the story, sorry for any confusion.

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Julian Stevens

Nov 07, 2012 at 14:40

One could look at it two ways. Either:-

1. The bank salespeople have for years been lying to customers about the cost of their advice. Or

2. The advice (I see you've just received £100,000 so what you should do is invest it in one of these) IS free but what really costs the customer is the charges for making the investment on which they've been provided with free advice.

Which brings me back to my earlier suggestion that not less than a third of whatever Adviser Charge is proposed should be chargeable before the presentation of any product or application form. If it isn't done that way, then it isn't really an Adviser Charge at all, is it?

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Sam Caunt

Nov 07, 2012 at 15:20

Problem with that Julian is that if advice becomes the predominant element then surely we should be charging VAT...

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another IFA

Nov 07, 2012 at 15:27

@Sam- the VAT rules are not quite like that. If the fee is for advice that will lead to a client investing in a product then no VAT is payable- if its generic advice then a charge needs to be added to the bill.

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Philip Melville

Nov 07, 2012 at 15:29

@another IFA,

All I can say to you is that if any of the people who provide services to me ever refused to help one of my children because they didn't have enough money then it would be goodnight and goodbye.

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another IFA

Nov 07, 2012 at 15:35

@Phillip Melville- who "refused" to give advice? RDR has presented the need to charge- if we complete fact finds, atr forms etc it takes time- but if your children share your attitude to life and people its not hard to see why someone would refuse to offer advice is it!!!

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Arthur Schopenhauer

Nov 07, 2012 at 15:42

VAT will apply to everything have you not seen the new attack by the European lot on exempt children's clothes recently any short lived anomoly will soon evaporate

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JonnieB666

Nov 07, 2012 at 16:11

They can all get served by MAS and go and make their own decisions for all I care. I for one am past caring about all these millions of people who do not value the cost of professional advice. If they are happy and comfortable doing it themselves, great but they should also be excluded from any possible compensation claims as part of the process and this should also be speeled out to them loud and clear. Anyone who thinks advisers work for free is naïve at best although I know some people want our advice and expertise and then want to disappear quietly and go off and do things themselves. RDR is an excellent opportunity to sort these people out at the outset. We have all met them and they basically think it is ok to get as much info from an adviser as possible then toddle off to do things online etc. Well good luck to them if they think that's going to continue.

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John Brady

Nov 07, 2012 at 20:18

That's OK Michael 159. I didn't see the article prior to it being edited.

Most clients understand adviser fees/ product charging quite well if it's explained in detail to them, the problem is that they dont remember it.

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Ian Lees

Nov 08, 2012 at 06:31

Only 5 Million people who will be left without advice according to Deloitte - but that is after the destruction of so many small businesses by this Conservative Government - who refuse to listen. Then there are those who worked for the small busineesses - who like bankers have become redundant - and unlike bankers cannot be housed in the FSA. The great news fo rgood IFA's and Financial Planners is that they can choose their clients even more so now. Now that is " Restricted Advice ", from a restricted arena - with reduced competition - which means - good advisers can increase their charges accordingly. It is simple economics - increase the charges reduce the services - for the few against the many. Don't you just love " Competition ? "

Well done Dave ( aka Cameron ) - or should I say LOL ?

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Ian Lees

Nov 08, 2012 at 06:31

Only 5 Million people who will be left without advice according to Deloitte - but that is after the destruction of so many small businesses by this Conservative Government - who refuse to listen. Then there are those who worked for the small busineesses - who like bankers have become redundant - and unlike bankers cannot be housed in the FSA. The great news fo rgood IFA's and Financial Planners is that they can choose their clients even more so now. Now that is " Restricted Advice ", from a restricted arena - with reduced competition - which means - good advisers can increase their charges accordingly. It is simple economics - increase the charges reduce the services - for the few against the many. Don't you just love " Competition ? "

Well done Dave ! ( aka Cameron ) - or should I say LOL ?

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Barney Stackhouse

Nov 08, 2012 at 08:49

No surprises there. As a former member of a Union representing financial advisers we told the FSA at the highest level that there plans were going to create social exclusion. Their response - 'we are not concerned with social exclusion' so the findings of Deloitte's will come as no surprise to those in the ivory towers presiding over what will eventually be the demise of the 'face to face' personal advice and planning service.

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Barney Stackhouse

Nov 08, 2012 at 08:50

Sorry - their plans.

Compliance pick up typo's as well these days ha ha

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dean ifa via mobile

Nov 08, 2012 at 09:59

I find all of your comments very interesting..having been in FS for 20 yrs I still find RDR raises more questions than answers... The suck it and see approach comes to mind.

Having huffed and puffed through my RO exams and to be honest probably been a pain in the arse to live with for the last 12 months ...even my dog Henry has stopped wagging his tail when I come in and he then has to prepare himself as I wittle on about service propositions and segmentation...

I can only come to the conclusion that the top men at the FSA must have watched Jerry Maguire on evening and thought...bingo less clients....yes!! ...spend quality(unpaid) time with your clients...yes...tell all your low revenue clients to do one.... Yes!! I mean..no!!!.....remember to know your alpha,beta,sharpe and standard deviation.. all my clients discuss those measures over a cup of tea and an arrowroot while topping up their Isas....

I will leave the charging if vat for another time ...

God bless you my comrades in arms...or should I say fellow competitors

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