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FSA rejects fears advisers will dump mass-market clients

by Daniel Grote on Nov 19, 2012 at 07:57

FSA rejects fears advisers will dump mass-market clients

The Financial Services Authority (FSA) has rejected fears that the retail distribution review (RDR) will lead to advisers dumping their mass-market clients, The Sunday Times has reported.

The FSA has pointed to the results of a survey it has conducted showing 63% of advisers plan to to retain clients with savings and investments worth between £20,000 and £75,000, while 38% will retain those with less than £20,000.

The survey follows a study by accountancy firm Deloitte that claimed 5.5 million clients would no longer seek financial advice after the introduction of the RDR.

FSA head of investment intermediaries Linda Woodall (pictured) said: ‘We are encouraged to see that a large number of advisers plan to provide advice to people with smaller pots to invest. It is important that a range of services will be available for consumers once the changes to financial advice come in.’

84 comments so far. Why not have your say?

Nope via mobile

Nov 19, 2012 at 08:21

As a firm we have looked at it from the FSA's favoured cost benefit analysis and we estimate that a significant part of our client bank will be unprofitable as they will not or cannot pay for advice and given the work involved it would to be a minimum fee of £750 for a £20k investment. Sorry but FSA may be wrong here

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Christopher Mellor

Nov 19, 2012 at 08:22

Both the FSA and Advisers are naive. Many Advisers are still thinking that they should and can chase every penny of income possible. Well until I have been shown how you can operate a process that serves a client with AUM of £20,000 producing fee income of say 1%, £200 per annum, and make a profit, I for one will continue to review my client bank and resign where a client is not prepared to pay my minimum fee income. I am very sorry to say but it is now the harsh reality of the business world that we are moving into from 1 January 2013. Advisers are no longer charities and shouldn't be doing pro-bono work. Every client seeking my valuable, hard trained for time, must be a profitable client. Otherwise how can I provide to them the level of service that I wish to and they deserve ? Advisers need to get real, wake up and smell the coffee. They are also telling the FSA what they wish to hear, naively. The FSA has created this landscape and if certain Advisers don't go bust early in January then they soon will later in the year chasing clients with £20,000. Fewer clients, higher income levels = a profitable more rewarding business.

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Nick

Nov 19, 2012 at 08:24

it will happen FSA, and you caused it!

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Scrapheap

Nov 19, 2012 at 08:26

So the FSA's own survey suggests nearly 2/3 of people with less than £20k and over a 1/3 of those with under £75k are to be dumped and they use that as a defence?

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Jack Sparrow

Nov 19, 2012 at 08:32

Hands up if you would tell the FSA that you are dumping unprofitable clients, haven't full qualified and are not fully prepared for RDR. Lies, damn lies and FSA stats.

Intellectual Vanity = FSA

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Scrapheap

Nov 19, 2012 at 08:32

One other thought on these FSA stats - are they weighted for the size of the IFA client bank.

If not, I would suggest smaller IFAs are likely to say 'yes we'll keep looking after those with smaller pots' (probably as existing clients, referrals etc & not too many) but then are they weighted the same as large IFAs with thousands of clients who may well say they won't?

Or vice versa but I suggest the above scenarios are the most likely - see Tenon's recent announcement on the thousands they are dumping.

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Tony Clarkin

Nov 19, 2012 at 08:33

I'm reminded of the immortal words of Mandy Rice -Davies;

Well, they would say that wouldn't they?

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John Phillips

Nov 19, 2012 at 08:33

The FSA have more of a chance of walking on water than they have of predicting what the IFA community will do post RDR. They have never been the slightest bit interested in the outcomes of their continued meddling for the IFA or the consumer. It will become all to very clear that the cost of giving advice to the masses has doubled under RDR, add to this FSCS levies and FSA increased fees, not to mention PI and solvency issues and you would have to be blind, deaf and dumb not to see the eventual loss of advice to those without at least £100,000 to invest. Either that or work for the FSA.

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Graham Bond via mobile

Nov 19, 2012 at 08:34

There is a big difference between dumping a client and not providing ongoing advice. Ifa's will find it difficult to provide ongoing advice for clients with small portfolios post rdr. Minimum fees could deter many clients from seeking ongoing advice.

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David Salmon

Nov 19, 2012 at 08:37

FSA - "Phew, the survey gave us an answer we can spin to our advantage. Now quick, heads back in the sand before we get anything to the contrary"

Advisrs may well "plan" these actions, but how many will in reality once the RDR is with us??

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Sid Cynical

Nov 19, 2012 at 08:48

Ms Woodall's defence reminds me very much of a scene from Blackadder Goes Forth when Lieutenant George spoke up for Edmund Blackadder after the slaying of the pigeon named Speckled Jim which belonged to General Melchett - LOL

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Dragonmartial

Nov 19, 2012 at 09:02

DO ALL OF THE FSA's OWN STAFF PAY FOR FINANCIAL ADVICE?

They must employ hundreds if not thousands of ordinary people!

Can we have a genuine survey on this?

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Philip Wise

Nov 19, 2012 at 09:13

Oh yes, survey monkey surveys.

Questions designed to lead to the conclusion the questioner wanted, answers might as well be filled in by a monkey. Then reported as fact, spun by whoever is doing the "research" and then commented on to increase advertising revenue for online news.

Modern life is rubbish.

Was there a free entry draw for an ipad?

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Arthur Schopenhauer

Nov 19, 2012 at 09:21

With heads in the sand it does present a tempting target for the kicking

The puzzle palace at docklands should get out into the real world sometime

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Barry Barnes

Nov 19, 2012 at 09:23

Deluded!

Unfortunately the FSA follow a trait similar to a number of political bodies in that after taking a stance it just simply cannot admit it is wrong. To dismiss the Deloitte report with such apparent flippancy, due to it’s contradictory opinion, shows an arrogance that does nothing to enhance any confidence the industry needs to have in them.

Whoever commissioned market research in order to structure RDR certainty never spoke to any advisers working within the mass-market, or if they did they their views were also dismissed or were not considered relevant.

As often implied of politicians, out of touch comes to mind.

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John Phillips

Nov 19, 2012 at 09:24

How does a survey that states 37% of those with 75,000 or less and 62% of those with 20,000 or less will loose their adviser "encourage" anyone beats me. Add to this the number of exiting advisers and you begin to see the tip of the iceberg that is to be the destruction of our industry.

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MID

Nov 19, 2012 at 09:24

Sand, head in..................

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Sophies Grumps

Nov 19, 2012 at 09:26

This is worrying!! Have the FSA opened their eyes at last to the problems they have caused to middle England !!!!!!!!

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Gillian Cardy

Nov 19, 2012 at 09:35

Each time this discussion pops up it assumes that

(a) only people with money to invest want your advice

(b) that the advice you give must be to invest money

(c) that only people with money to invest can afford your fees

Question these assumptions (if you want to - clearly choosing to operate in a higher net worth space is your commercial choice) and businesses that want to challenge these assumptions will, in my view prosper.

From my own experience I concur with an appropriate minimum fee of £750 ... but in old money of 3% + 0.5% that means you could deal with someone with £25k to invest (if you wanted to - like Nationwide does) and you could get trail commission of £125 per annum (and someone with that much invested can be reviewed extremely cost-effectively (if you choose to set up your business that way) if they are not prepared to pay extra for multiple annual meetings or face to face meetings ...

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John Phillips

Nov 19, 2012 at 09:43

@GC

You're right but it doesn't stop us wanting to have a go at the FSA when they come out with tosh every other day :-)

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Chartered Mark

Nov 19, 2012 at 09:47

The FSa are not lying. (I mean, be honest, would a regulator lie about their failures?)

No, IFAs will present there proposition to clients. "Pay me a fat fee or sod off".

Many clients, particularly the "mass market" will not pay, and will walk away.

So the FSA are correct. As an IFA I did not dump these clients, they chose to not seek my sdvice.

Come on FSa, ask the right question in the survey, and you will get the true answer. Not sure if you will like the response that you get. At the same time you could ask the IFAs if they think that you have done a good job. But I don't think you have the guts to ask that question.

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John Smyth 3

Nov 19, 2012 at 09:57

Why then have the Pru, Aviva, Standard Life and a few others recruited new direct sales people?

Why then are the banks and building societies attempting to do more online or on a simplified or no advice basis.

@ Gillian

Please do not use Nationwide as an example of something virtuous . They are not IFAs they are tied to L&G mostly, Latterly AXA and several other general insurers for home and motor insurance.

They are a building society who load members protection premiums in order to get more commission for themselves, have started flogging Axa's over 55 rubbish on a no advice basis without showing their commission take and flog bonds to any poor unsuspecting member who enters their premises.

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Hugh Malcolm Morton

Nov 19, 2012 at 09:57

Gillian you make a good point but i'm not sure that there is a long term future in someone with £25k unless there are other areas that you can help them with where you can earn money.

But are the FSA looking at IFAs or the whole adviser market, including the banks etc, where maybe the others are saying they will look after these people? The problem is a lot of them are withdrawing their advice arms, so is the stats out of date already?

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Bob Donaldson

Nov 19, 2012 at 10:01

Surely the figures of 63% and 38% speak for themselves. That is still a lot of clients that are going to get dumped.

Unless some way is found to make the job easier, less paperwork and box ticking, the costs are reduced then I don't see how anyone can service small clients.

You only need to take 150 clients and divided that into your FSA fees, FSCS fees and PI costs and you end up with a starting figure for each client of about £100.

Then add in the cost of staff computers and software etc and you can see how someone is not going to service an individual with £20,000 to invest, or an open market option annuity purchase of say £20,000.

When will the FSA wake up to the fact that it is not profitable at this level for virtually all advisors who are actually looking at their costs correctly and not cross subsidizing the small clients with the bigger ones which is what has happened in the past.

Remember the old saying turnover vanity profit sanity.

Whilst I sympathize with all those that can't afford to pay our costs for advice, taking the above, the first £100 is not profit it is just to pay the simple costs of regulation.

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Arthur Schopenhauer

Nov 19, 2012 at 10:07

@John Smyth 3

The direct sales forces, like SJP and the ones you mention will be able to pay commission and so spread the cost of the advice over the life of the product. Surrender penalties will deal with the mortality of the policy or product.

The system is rather like buying a mobile phone where the true cost of the hardware is amortised in a similar manner otherwise phones would not be so widely owned

Eventually direct sales will be a much larger proportion of market and will add to the confusion of the public

The products will be marginally poorer than those offered to fee charging people

This cycle of constant reorganisation is set to last for ever, expect a 2013 Pension Act to add to the simplification

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Philip Melville

Nov 19, 2012 at 10:26

Why not look at life a litle differently and just maybe you might find yourself pleasantly surprised.

it is quite feasible to deliver an advice proposition to anyone at a profit using online technology.

Most people understand the need to provide for the " what if scenarios " in life but they usually dont understand the process our industry currently tries to involve them in and so quite naturally choose not to join in.

If you give people a transparent low cost process that they can understand without you being present they will usually welcome the chance to do something about those financial things that concern them.

Your financial structure will need to be quite different to the one we have all traditionally used but with scale you can do very well out of all sections of our community.

Happy to show anyone who is interested how it actually works very well for our business and how it can do the same for anyone with a willingness to adapt.

But I amsure I will be deafened by the cries of people wont pay etc. rather than hte silence of advisers who wont adapt.

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Ian Lees

Nov 19, 2012 at 10:34

Linda Woddalls comments are as unwelcome as they are illogical ! Why would the remaining adviser - after RDR wish to work in the " Mass Market ? "

Obviously Linda has not noticed Deloittes report - or the many people who have opted out - will provide restricted advice - or no advice. The thousand of advisers driven out of financial services - on the spurious claims of MP's and the fsa - that they did not reach a " minimum level of qualifications ", is absolute rubbish. The destruction of the trust between advisers and their clients - has been the biggest problem - and the use of internet and social media has destroyed the "common" link ( or phlebs - as conservative MPS call them ). We see the results of tesco taking over the world - except that Asda is better, sainsbury's on the sidelines - there is no competition, and that is the way forward in financial services - the destruction of the adviser.

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David Cathcart

Nov 19, 2012 at 10:36

The amount of AUM has little to do with this. It has everything to do with clients willing to pay the adviser firms minimum fees.

After all the regulator is not advocating that adviser firms trade insolvently, or are they ?

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Barney Stackhouse

Nov 19, 2012 at 10:45

If the FSA were honest they'd tell the truth and just say 'Whatever, we ain't bothered' cos that's effectively what they told Alliance For Finance when this whole social exclusion (which is what it actually is) problem was highlighted way before the RDR became the industry destroyer it will most likely turn out to be.

R I P F S

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Philip Melville

Nov 19, 2012 at 10:47

Oh well ! as expected the luddites jump in quickly to dampen any chance of enthusiasm.

You actually do want to go down screaming I told you so don't you !

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Arthur Schopenhauer

Nov 19, 2012 at 10:54

@ David Cathcart

Since the FSA has no IFA business model to base its many statements on it is naturally hard for them to make any meaningful assessment of the impact of their actions on the IFA community.

They are not stupid people so when actions and words don't match

It must follow that the objective is other than those stated

One objective could be to have larger institutions to fine rather than a diverse number of small businesses

Result is consolidation and direct sales forces would be the first stage then an attack on the self employed status of IFA and Direct Sales forces would follow

It is the large institutions who are being protected at the expense of the general public

Follow the money

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Graeme Ferguson

Nov 19, 2012 at 11:08

As with any statistic it can easily be spun or is just generally flawed but its own data collection!!

I think the interesting area here is initial fees and ongoing servicing. At £25,000 transfer or investment you may charge 3-6% in fees, this would most likely work out ok when you assessed against actual fees per hour... however even at 1% on AUM you would be looking at £250 for an annual review...... so if you were meeting the client, though you don't of course have to, conducting a new risk profile, updating your financial data, doing a fund review and potentially then recommending a fund change which needed to be a compliance cycle and therefore a report then £250 would not cover the costs.

So you either don't provide a service and don't charge, provide a stripped down service which did not include fund switches or agree to review every 2-3 years and bill accordingly, though this will be VATable as there is no intermediation!

Look i live with RDR and thankfully the business has been running like it for 2 years....but it doesn't take a Mensa member to see the issues...claps all round for the FSA what a mess and you still keep digging!!

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Philip Melville

Nov 19, 2012 at 11:09

Maybe one objective is to challenge us to adapt and to do what is best for the public for a change rather than continue the self serving stuff which has helped to create the mess we find ourselves in ?

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John Phillips

Nov 19, 2012 at 11:09

@ PM

Happy to hear what you have to say on the new business model Phil, however is it worth having a £750 initial with a £150 recurring if the FSA deem your website isn't really treating customers fairly or your content wasn’t clear enough for the great unwashed waiting for their next compensation cheque.

It also changes, 360 degrees, what I do for a living, which is add value to my clients lives by being there for them in all important decisions about their financial wellbeing. If I was in it just for the money then Social Media, Internet marketing and “Money Supermarket” experiences would be what I would major in, however, I’m a people person, hand holder and shoulder to support you on type of guy, so you can stick the future if it’s web based.

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Charles Rickards

Nov 19, 2012 at 11:13

There will still be a cross subsidy in place for most firms as most firms will continue to charge a percentage of funds under management for ongoing service.. This means that IFAs can if they choose continue to service the lower wealth clients. However, those that choose to charge a flat rate for the services they provide will undoubtedly lose or remove those who can not afford to pay.

RDR will be detrimental to the majority of consumers, due to the costs associated with providing regulated advice. Once the full effect of this is evident to the media, pressure will be brought to bear and it will all be reviewed again.

RDR - Raising Standards is good, but exam passes do not guarantee quality. Is a commission ban really going to stop those who are only concerned with lining their own pockets? Is it going to make the UK financial services market place more trustworthy? Apart from the product providers and the regulator, who will be better off?

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James Clancy

Nov 19, 2012 at 11:19

Personally, I feel you can do all the survey you like. The bottom line is whatever arrangements you make is mutually acceptable to both parties.

If the clients(customer) does not perceive any in your service they will not sign the cheque.

Personally speaking I feel that advisers going forward will be reduce their fees

My approach, is to come up with a proposal that is mutually benefit to both client and adviser that both parties can commercially live with.

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Graeme Ferguson

Nov 19, 2012 at 11:20

@John Philips

I thnk your right about been driven to a web based environment, however technology will play a huge part for the future.

But you need to be able to deliver the technology to a client not just push them in the direction...so agree with some of your points

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James Clancy

Nov 19, 2012 at 11:21

Sorry for the mistake. Should read

If the clients(customer) does not perceive any value in your service they will not sign the cheque.

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David Cathcart

Nov 19, 2012 at 11:22

@Arthur S

Arthur you make the point very well, but the FSA have more than enough data on the IFA firms to judge the future impact of RDR. All of this data appears on the Gabriel returns every 6 months.

For the most part I agree with RDR, but one of RDR 's failing is that it has all but elimated how the mass market chooses to pay for advice and secondly it has handed on a plate an instant increase in profits for the insurers by allowing them to retain the existing charging structures but cease payment of commission. The client is effectively being double charged.

This is rife amoungst the insurers and should be seriously investigated by the regulator. Not just take the word of the ABI who completly deny this is happening - but they would, wouldn't they.

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madmitch

Nov 19, 2012 at 11:31

Everyone who wants to dump their non cost effective clients, please pass on to me, I will see that they all go to a good home.

Going to be a huge market out there by the sound of it.

Many advisers simply overvalue their abilities and real worth to a client, there are some who are worth every penny, but this is generally the exception rather than the rule.

There are many ways of managing relationships, low value portfolios are generally low maintainance, the cot to us is negligible.

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Ross D

Nov 19, 2012 at 11:32

So all you IFAs who are saying to the smaller clients, "you're not profitable, so we won't deal with you", are you actively cancelling the trail commission coming in?

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Gillian Cardy

Nov 19, 2012 at 11:34

How much money does a person have before they have £25k??

Less. They started somewhere??

In assuming that people who do not have £25k to invest are "poor" people or "mass affluent" and then to also assume that they will not pay you for your valuable professional advice about building up their savings and investments and providing for their financial futures advisers make a very big assumption. People pay for the costs of advice out of products (if facilitation is permitted) or from wrap cash accounts or from their personal bank accounts because they earn well but have no saving yet, perhaps becuase they've been focused on reducing their mortgages or paying for school fees.

We know from other work that clients are increasingly self-investing - so again, you don't get the initial adviser charge or the continuing advice income, but you would be rash to assume that they either don't have money or don't want your advice.

I wasn't holding up Nationwide as paragons of virtue - I mentioned them as they have found a way to advise clients with £25k - and you very interestingly provide the answer to your own conundrum : perhaps they can afford to do it because they have other sources of revenue - clearly if they are acting as you say then you ned to report them to the FSA - but the point remains that they can for example transact protection business on which they can still take commission and which can very easily offset the costs of advice for smaller clients, either on an indemnity or non-indemnity basis.

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Philip Melville

Nov 19, 2012 at 11:36

@ John Philips,

My model is certainly not a new one and has been enthusiastically used by our clients - washed and unwashed - rich and poor - for almost eight years now and reviewed and approved by the regulator.

In case you haven't noticed the world has changed and many functions now use technology to implement process things and thereby allow people to spend more time with people doing people things.

I guess though that your use of words like " great unwashed " say more about you and your sense of self importance than any piece of technology could ever do.

Sadly I have not taken Holy Orders and I have to work to earn my living and whilst I enjoy my job I have to do it in a way that allows us to eat.

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Graeme Ferguson

Nov 19, 2012 at 11:50

@ Gillian Cardy

Some valuable points which I 100% agree with, and as what I would call a "general" IFA this is why I have major issues with segmentation... example I have a client who has £25k in a pension and £10k in an ISA, his reviews are not profitable... however just about to do a £500,000 mortgage and protection..... so if I had segmented then i miss out on other services that add to profitability..... but there is your problem

Many IFAs decided to specialise either in Investment or pension or both, I could argue that the FSA pretty much helped/made them do this.... now the world changes and the FSA like general IFAs again, there are many businesses entrenched in an old model who neither want to or can move back into full client servicing...as they need to retrain in other areas, need to develope and use new technology.... hence where RDR becomes unfair for many...sure opportunities for some, but thats not fair for an industry that the average age of an IFA is mid 50's....

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Philip Melville

Nov 19, 2012 at 12:16

@ Graeme,

It was not the FSA who created " Investment Advisers ".

It was the providers who decided that they would only pay commission on lump sums who brought this about.

No point in throwing stones at the wrong target.

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Graeme Ferguson

Nov 19, 2012 at 12:25

I don't throw stones! Just my observations and also IFAs respond to perceived influences and risks

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Charles Rickards

Nov 19, 2012 at 12:38

It is up to every IFA or IFA business to decide how they want to trade within the limitations presented by the regulations. If the RDR does mean that those with lower wealth can not afford advice or on going service, then the rules will be adjusted again until the desired outcome is achieved. Are the financial services industry/profession and the regulator looking for the same outcome?

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Philip Melville

Nov 19, 2012 at 12:40

You mean they sell whatever pays commission then ?

No more regular pension plans, regular savings plans, pension increments and so on... not surely down to the FSA ?

The stones thing was not meant to be serious.

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James Barr

Nov 19, 2012 at 12:42

Transact Transact Transact, activity breeds results, all creatures great and small,grow them all. where does wealth come from - answer it is built up over time

fat lazy arses in pinstripes need not apply.

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Philip Melville

Nov 19, 2012 at 12:56

Brilliant !

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Ian Lees

Nov 19, 2012 at 13:02

Activity ? Contempt ? I don't do either, very well . . . . I'm afraid !?! Although some might disagree . . .see . . . . My client have been happy with the service provided for many years. . . . I don't call him . . . until I need some money . . .then I flog him a policy . . .make some commission . . .go ski-ing then sell him another one for my next ski ing trip ! I found that having only one client in my client bank I am less successfult than Edinburgh based TSB - who have so many . . .they can sell them to the Co Op . . . to flog 'em. After so many decades of simplification e.g pensions, and the ew Treasury's steering group withEdinburgh's TSB - ex "heid o' risk", Carl Sergant and Peter Willaims of ex Scottish Equitable - are focusing on creating " simple products", - which is apparently difficult becuase of the " inbuilt guarantee", - which creates "difficulties". Perhaps therin lies the issue - they are trying to create products for the insurance and investment industry - when they already exist i.e National Savings or De Posit Accoonts. But even with these creative bankers and insurance company reps - trying to find a product they can flog - they have faield to address the man issue . . .is that most people do not buy products . . . they need encouragement . The mass market are lazy hence supermarkets, retials centres ( all of who are alike in every town - a McDonalds wiz he frae edinburgh, boots and jd sports). People need people - and can do without the internet. People like to discuss their financial arrangements with their adviser - who even with minimum knowledge ( accrording to Ann Main MP ) is still much better informed and better placed - to provide sound advice .

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Graeme Ferguson

Nov 19, 2012 at 13:10

@ Philip Melville

Sadly there is of course reason in that statement, however what industry doesn't need to sell a service or product? FS is no different

I am not picking, as I always have believed that if you provide a great service then you will be rewarded....

Thankfully I haven't had many sole monthly contribution plans to contend with however there is a very real issue with this going forward... an solely wants to do a £150 per month pension plan and wants advice on contract and funds..... not rocket science but if you were only going to take 3% of premium then you will be long dead before you make money, is client willing to pay £750 upfront to cover the costs....well maybe not..... so hence why people may get dis-enfranchised from getting advice, and give up!!

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Hickky

Nov 19, 2012 at 13:14

WOW, vitriol and anger, all directed towards the FSA.

I for one will not dump all my smaller invested clients, just like I will not dump my clients that pay small premiums vor protection.

Will I call them up monthly? No. Will I review their holdings annually and if I feel there is an issue, arrange to see them? Yes!

My time is free to me. Sometimes I can bill at a good rate, and others, like now, I cannot bill at all. What's better, talking to clients or moaning on NMA?

Talking to clients means you do have a chance of billing, blogging on NMA means.............. sorry, got to go, client wants to chat!

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Philip Melville

Nov 19, 2012 at 13:23

So Graeme,

If you had the chance to build up an annual recurring income of almost £100k just from people paying regular monthly contributions into their plans over a four year period you would not think it worth doing it if they only paid you 1% on every contribution. And of course if you then were able to charge a similar amount for their annual review that would not be an economic proposition ?

Or does everything have to come in the form of upfront payments to be acceptable ?

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Ian Lees

Nov 19, 2012 at 13:25

A monthly premium for a product - whetherr 3% or 60% ( or 180% as were offered advisers at insurance companies) - is of littel consequence. If a client changes their mind - for whatever reason - commissions are clawed back, and whether the adviser has level four qualification or level six - makes absolutely no difference. The point is clinets need to pay for advice - products can be purchased there or elsewhere - but the good adviser has been paid for their work, their knowledge, their skill - and most importantly for bringing the client to the decision, and often encouraging them to implement the decision. A decison without it being implemented - is a wish. Someone elses words - but so correct. You know who you are . You know your worth . Charge that amount . For those who have not taken Holy Orders ( i liked that one ! and make no apology for pinching it ) - the Mass Market - like the shoals of fish in the sea - will be decimated to the point of extinction. Herring lies the first lesson Linda Woodall - and it is good to see you take responsibility for these !

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Phil Castle

Nov 19, 2012 at 14:29

As mentioned earlier - There is a big difference between dumping a client and not providing ongoing advice.

We have let our "client base" decide, we have excluded no-one. We now have a very small client base <100 couple's who pay for an ongoing service, several hundred who chose to remain "on file" as "customers" with NO ongoing contract, we simply keep their info on file so if they contact us we have information to hand and charge for advice on request.

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Graeme Ferguson

Nov 19, 2012 at 14:31

@ Philip Melville

not logical... if I had only monthly paying customers and lets say the average was £200 per month, then you would make £24 on an annual basis... so ignoring any growth and fund based fees, youI would need 4166 new clients to generate the £100,000, so 1,000 a year....

@ £500 pm I would need 400 new client contracts a year....

Forgeting your stance, what other businesses do you know that do work for no income.... surely you are missing a standard business principle

I would also argue that to perform a task like you suggest that your business would have to cross subsidise from either other clients who have funds under management or other business or capital injection

Which in itself contraduicts the FSA view

A business start up or model change can not survive the rational you suggest.... if you have done this then you have cross subsidised, for everybody needs to eat and provide shelter and there are only so many hours in a day to work!

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Anitaki

Nov 19, 2012 at 14:42

There is a distinction between "importance" & "self-importance"

The FSA crossed that fine line of distinction some time ago. The self-important fail to listen. The self-important consider themselves infallible and thus they know better than everybody else. The self-important never admit mistakes, but when their diktats have been proven flawed, will blame other people, who they consider unimportant for the subsequent failure.

NO Regulator should be allowed to get so divorced from those who it regulates that it becomes completely out of touch, whilst those being regulated become unrepresented. This is what led to things like "The peasants' revolt", The Magna Carta etc. Many IFAs now feel themselves in the position of desperate measures and unrepresented. Those who were meant to representing us (AIFA for example) seemed to spend more time in arranging lunches that arranging a challenge to the FSA's authority. Nothing can stop this now until real IFAs are admitted to the board of the regulators similar to Trades Unions now wanting seats in company boardrooms. This unaccountability, and regulation by diktat will not cease until that happens.

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Charles Rickards

Nov 19, 2012 at 14:50

I personally agree with Phil Melville. The client decides whether you are worth it, and those who think you are will, if they can, pay for your service, either on going or when they feel they need it.

After all a solicitor will work for anyone who will pay him. People will find the money to pay a solicitor, if they think it is worth it!

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Ian Lees

Nov 19, 2012 at 14:50

Looks like I'm going to have to become one of those Kafflik advisers dealing in the Mass Market ! Only 4000 sales required ? Using my old direct sales skills that is make 30 telephone calls, get 10 appointments and 3 sales - now that is mass market sales . . . Ms Woodal . . . as she is in the FSA I wonder if she has worked it out . . .with a pencil yet ? l calculate that to be 1,200,000 telephone calls ? With 20,000 advisers left standing ( currently ) that is 2,400,000,000 telephone calls - forget financial services . . .buy BT or Virgin ( if you can get through ) Talk Talk shares . .. . .

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John Phillips

Nov 19, 2012 at 15:04

@ CR

Your analogy doesn't work, people use solicitors because they have to or perceive that they have to. Clients will always decided if YOU are worth it however some will decline to act because they have to pay you up front for the advice.

Factoring of fees, commission, was always dearer than an upfront fee however it was also more palatable to the client, I have always given the client the choice, now that choice has been removed. Is that really progress?

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Ian Lees

Nov 19, 2012 at 15:09

Soliciors are paid - becasue they have specific knowledge of Law . . . and are often called upon as the last resort - the person clients require consultation in remedy becasue they have exhausted other avenues.

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Philip Melville

Nov 19, 2012 at 15:14

Graeme,

Of course you cross subsidise. Every business has to cross subsidise unless it only ever does one size and shape of activity for every customer.

Does M&S have a different shop for different customers - and I do know that they have small ones and big ones.

Yes you can always prove whatever you dont want but we have done it and it is very nice income thanks and produces very good clients as well.

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Jonathan Kirby

Nov 19, 2012 at 15:20

The only problem with advising those with more modest amounts is the burden of compliance and paperwork which the client doesn't want but which the adviser needs to cover his or her back.

Cut the red tape and the problem is solved.

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Graeme Ferguson

Nov 19, 2012 at 15:24

Ahhh, however Philip Melville.... YOu are not allowed to do it going forward! So you can't really tell other firms that this works, stop moaning etc etc... if you only managed to do it because your more wealthier and profitable clients helped you pay for it.....

So would be nice to have a chat with some of the wealthy clients and say did you know that Philip used you to help build income from other clients who were not profitable???

M&S is probably a bad example for cross subsidising...cross selling yes! Asda would subsidise more!

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Arthur Schopenhauer

Nov 19, 2012 at 15:33

All this bleating misses the point there is no accepted New Model is there

I have said before you can have rules based on terms that have no definition and you cant have a reliable risk assessment unless you design a model that you are proposing to influence and test

So all this RDR is just Bol***ks you have all designed a way around it what ever it means

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John Smyth 3

Nov 19, 2012 at 15:33

@ Gillian Cardy

Not all IFAs can subsidise small networth clients as Nationwide do and by doing what they are doing you would be acknowledging that you are overcharging your high networth clients. There is no conundrum to solve.

The FSA is aware of the loaded protection premiums issue. It was mentioned a few weeks ago in one of there media blurbs. They said they were looking into this issue but as usual it will take another few years before anything further is heard. There is nothing stopping the FSA asking Nationwide and Axa for a look at their over 55 literature. Countless issues have been reported to the FSA over the years by IFAs and been completely ignored. Arch Cru, PPI, Endowment and inappropriate bond mis-selling are a few which spring to mind.

By the way the FSA do keep a watch on blog sites like this so maybe they might do a little investigating of Nationwide.

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Philip Melville

Nov 19, 2012 at 15:50

Gosh Graeme are you happy now ?

As it happens we remortgaged our properties on a couple of occasions to fund our business as we moved away from initial commissions, so we ourselves subsidised our clients - big and small until we reached an economic scale.

Should I stand in the corner now and await the naughty stick ? or should I and my clients be pleased that we found a way to work that only needed them and dispensed with providers influences.

Now off you go and try again to prove that the Earth really is as flat as you like it.

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Scrapheap

Nov 19, 2012 at 15:50

Especially I wonder if they looked at how many Nationwide Cash ISAs and savings accounts are becoming L&G platform Shares ISAs and OEIC/Unit Trusts once they've met the in-branch L&G tied adviser?

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Jenny N . I FA

Nov 19, 2012 at 15:55

The trouble is that all those poor misinformed people who got their advice from the banks will have nowhere to go now. The banks don't want to know unless you have over £150k to invest. The FSA have ruined so many peoples lives. We are already seeing the results of their incompetence in regulating the banks and it saddens me to see that our industry is losing many brilliant IFA's, some who will be taking their brains abroad. I'm certainly tempted. China anyone?

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Arthur Schopenhauer

Nov 19, 2012 at 16:03

I can tell you that working outside the UK is far simpler and more rewarding for all. Less is more when it comes to regulation the UK Financial Services is being destroyed by the regulator you only need to look at the number of new ventures being set up in Luxembourg

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Graeme Ferguson

Nov 19, 2012 at 16:06

Ah the problem Philip is that you go around preaching on these sites and self righteous telling people they don't know anything etc etc..... My point was only to prove that despite what you say, you have not played with same deck of cards... So really it is not myself that thinks the world is flat... Though if you take your rose tinted glasses off it may help!! Good luck with your future sermons

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Well Now

Nov 19, 2012 at 16:07

We all know the FSA lives in a BUBBLE, why is everybody acting suprised ?

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Lyndon Edwards

Nov 19, 2012 at 16:21

Servicing activity does not need a regulated individual. It should be perfectly possible to employ a retired/non-qualified but appropriately experienced adviser to do client servicing by email / post etc while the qualified among you get on with the money making - or is that too simple? They may even be able to alert you to a new sales opportunity, sorry, 'advice' opportunity.

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You must be joking

Nov 19, 2012 at 16:47

@ Greame Ferguson

In your 15:24 post you state "YOu are not allowed to do it going forward" in response to Phil Melville's comment regarding cross subsidising between clients.

Can you please explain why you have this view?

Where in the FSA rulebook, guidance, consultations does it ACTUALLY say this?

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Ian Lees

Nov 20, 2012 at 06:22

Some people work above and beyond the basic rule book. For example in open or honest dealing. For an example of failure of cross subsising have a look at the faiure of with profits funds e.g Scottish Widows - use and abuse of policyholders money invested for growth and profits - and the conflict of interest of their actuaries and dal;es directors - where the funds of mutual insurers were used to cross subsidisethe failures in marketing and covered up by the accounting department. No reasonable or sensible business " cross subsisies - do they ? "

In my opinion if you need to subsidise an area of your business you have not thought it through properly, or got your pencil out and done the calculations - it is a hope and hit strategy - and some will pay off - but for how long.

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Ian Lees

Nov 20, 2012 at 06:22

Some people work above and beyond the basic rule book. For example in open or honest dealing. For an example of failure of cross subsising have a look at the faiure of with profits funds e.g Scottish Widows - use and abuse of policyholders money invested for growth and profits - and the conflict of interest of their actuaries and dal;es directors - where the funds of mutual insurers were used to cross subsidisethe failures in marketing and covered up by the accounting department. No reasonable or sensible business " cross subsisies - do they ? "

In my opinion if you need to subsidise an area of your business you have not thought it through properly, or got your pencil out and done the calculations - it is a hope and hit strategy - and some will pay off - but for how long.

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Ian Lees

Nov 20, 2012 at 06:40

Mr Scrapheap - Banks like Edinburgh based TSB are selling their custoemrs to the Co Op - where they will get their divi in future. With regard to the hook loine and stinker approach offered by the sloppy employees of Nationwide - Graeme Beale is a director of Visa card - the authorised overdraft facility - and if you look at the Bored of Nationwide ( intentional ) - you will see an array of insurance company dicktators. Mutual - well maybe in name - looking after customers ? ( like tsb - no way Hose ! ). The bank of clients - owned by tsb Barclays and the other banks of scotland Royal ( and some might say ancoent ? drummondcoutts etc., ) - will have to shop at tesco - where every little helps - tesco. By driving people on line with dodgy credit cards - incompetent call centres - and their offloading client information illegally . The common consumer ( and the conservatives call them " Phlebs" ) - are left " up the creek ( unlike Europe - which is up the Greek ) without a paddle ! ?!

The governemtn favours the strong - like banks who are insolvent - kept affloat by the tax payers money - and the FSA hands out fines to these fiddling financial organisation - who are willing to pay them - but where does the money go - after that ? It seems like fines are the legalised backhanders - to keep MP's and their regulator - in the way to which they have become accustomed - incompetent and unnacoutable !

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Sam Caunt

Nov 20, 2012 at 08:41

Given the FSA's bias towards product and not advice then to some extent I can see where the FSA is coming from. Firms will find a way of dealing with low net worth clients. However, bespoke advice is a different issue. Mr Client, as a result of regulation, RDR (and other rising costs such as PII, fees etc.) your charge will go up from £125 per hour to £175 per hour (now with VAT added). Inevitably clients will walk away from advice, disengage with their IFA and the FSA should be concerned about that - how will the bespoke advice gap be filled?

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Jonathan Kirby

Nov 20, 2012 at 09:14

Perhaps those in government & at the FCA should consider seriously why it is that the amount of research and information in an ISA report for a simple straightforward client would cost upwards of a £1 million were it commissioned by them as a consultation, yet we are supposed to be able to sort it out for a few hundred pounds?

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Ian Lees

Nov 20, 2012 at 09:40

It is extremely frustrating for advisers that the FSA appear to live in their little bubble . . . and we all know that to burst a bubble requires *!*!* Now that the government are intent on drawing a line under the FSA - in an attempt topto cover up theri failures - and introducing the FCA , to draw attention away - and the comments on bubbles - I can only assume these letters FCA stand for the Financial Condemnation Authority. If Sir Philip Condon ( London bobby ) had been asked, would it be the Fiancial Condon authority ( or anything close ?).

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Arthur Schopenhauer

Nov 20, 2012 at 09:47

@Ian

Lets hope they have a run off policy

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John Phillips

Nov 20, 2012 at 10:25

Do you think the FSA support West Ham. "They're forever blowing bubbles, pretty bubbles in the air". I think it is time to mention the War and certain a mustachioed dictator and bring an end to this blog :-)

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Andrew King

Nov 23, 2012 at 16:56

Phil Castle said

"IThere is a big difference between dumping a client and not providing ongoing advice."

I agree why dump someone when you can wait for them to contact you

We all have Policyholders whio may have used us for transactional business. they are NOT clients. we dont necessarily service them nor should we

Then we have Clients the 20% of our list who produce 80% of our income they are the ones we "service" whatever that means?

I have decided rightly or wrongly to draw a line in the sand and start with a blank sheet of paper and offer the 80% the choice of being a transactional client only, a transactional client who values and is prepared to pay a minimum of £500 for an annual review either face to face ( more expensive ) or by telephone.

the premier 20% will get all my attention and improve the service i provide for them .

finally a question

you have a client with say £500,000 and are taking a 1% trail commission on the money.

You are going to change to a servicing fee arrangement of 1%

the client asks wow that is £5000 what exactly do you do for that £5000 ???

and why is it worth it ?

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