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HSBC IFA arm to turn restricted post RDR

by Rachael Revesz on Nov 02, 2012 at 12:48

HSBC IFA arm to turn restricted post RDR

HSBC’s financial advice arm will become restricted from 1 January next year.

The in-house team of 400 advisers currently offers a whole-of-market proposition, but this will change after the retail distribution review (RDR) comes into force.

A spokesman for HSBC said that nothing would change about the service offering, it just would no longer meet the Financial Services Authority’s definition of independent.

‘Our advisers will continue to advise on the same type of products and the number of products will stay the same but under RDR, what we advise on can’t be considered independent,’ he said.

The bank’s arm advises on 15-20 fund management groups and other products, he added.

Earlier this year the bank cut its tied-advice service, losing 650 advisers, leaving only its independent whole-of-market arm.  The spokesman said that no further adviser job cuts were on the cards.

15 comments so far. Why not have your say?

Jonathan Kirby

Nov 02, 2012 at 13:22

So what they are effectively saying is they should have been classed as a Multi Tie all along?

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James Marchant

Nov 02, 2012 at 13:41

I'd say more like single tie based on the number of times I have seen recommendations from an HSBC IFA where a significant amount of the money was going into HSBC funds!!

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Insiders Comment

Nov 02, 2012 at 13:51

After all this nonsense has died down and the clients are as totally confused as the rest of us maybe,just maybe this dopey Government will heed the advice it has been given for the last two years and rein in the powers that the FSA weilds. Heads should roll over this whole fiasco and although the RDR architects are well gone those left that didnt see fit to alter the terms should be sacked.

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Gillian Cardy

Nov 02, 2012 at 17:53

"what we advise on can't be considered independent" - so what are they not advising on that means that they can be IFA (i.e. whole of market and offering clients a fee option) right now but would not be on two month's time??

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Ex HSBC er via mobile

Nov 02, 2012 at 18:58

Not independent and not advice, as they can't provide pension transfer facility. !? Fee for this "advice" - Mr Customer you have a need to address this area, but not something we can advise on. Oh and there's a charge of £x,000 for that ! TCF or value for money - you decide !!

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dominic browning

Nov 02, 2012 at 23:29

Who exactly will be left to give financial advice. We have been told that the bancasssurers will close, the big IFAs are losing money hand over fist, the networks are in terminal decline, the sole traders havent got enough resources to survive, the general public dont generally want to pay fees. So who is left?? The RDR is an absolute disgrace which is destroying in one fell swoop the financial advice industry, removing financial advice to all but high net worth. How has it been allow to happen? For those few firms that survive, however successful they may be, they will be destroyed by the huge FSCS burden placed upon them.

Why forcibly destroy the lives of thousands of financial services professionals at a time when this country needs to generate more jobs not destroy the few that are left.

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Gordon Young via mobile

Nov 03, 2012 at 10:49

Totally agree.. It's a disgrace what is happening...

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Investment Guru

Nov 03, 2012 at 11:36

@dominic browning

For clients with £1m + the Private Banks will continue to service but not even they are claiming to be independant.

In the £250k - £1m market I suspect (and hope) that good quality advice will be sought from the best "independant" Financial Advisers, probably working in Chartered Firms.

The sub £250k market could find itself very much on its own, with simplified advice around products and then trackers (Vanguard) offering a basic fund management service from 0.07% per annum.

Realistically, there is a huge price squeeze coming down the tracks and if we are not genuinly adding value to the proposition then you are going to get squeezed out. I've seen SIPPS and OSBs recently with TERs north of 3% with product provider, IFA, DFM, and unit trust managers all taking a slice. Post RDR, this is going to end pretty quickly once genuine visibility asserts itself.

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Gillian Cardy

Nov 05, 2012 at 09:24

This is not logical.

Pretty much everyone who lives and breathes is planning to offer their clients an adviser charge which is a percentage of assets invested plus a percentage of assets under management. Something which sounds a bit like 3% + 0.5%.

Or maybe 2% + 1% ...

I still wait for someone to explain to me how on earth advisers, let alone Independent advisers, have managed to stay in business for the last 20 years advising clients with considerably less than £250k.

A client with £50k could in old money generate commission, without going anywhere near a debate about Investment Bond commission bias, of £1,500.

If it is totally impossible to deliver advice to a client profitably then how on earth has everyone been holding it together for so long??

And if your new adviser charge happens to look very like the terms of the old world commission shape then what exactly is changing?? And why overnight do we find that anyone with less than £100k (as per MoneyBox) or £250k (as per above) will enter this Bermuda triangle of financial advice where they are "on their own"??

And please don't forget that many of the smaller clients may have less to invest but they still have pressing mortgage and insurance requirements, all of which can continue to pay commission if you really need it to fund the investment advice side of the business.

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Gillian Cardy

Nov 05, 2012 at 09:30

@ex HSBC er : as a point of fact, and to correct a common misunderstanding.

A firm must have a firm's permission and a pension transfer specialist with an incremental qualification to advise on pension transfers. If a firm does not have that permission it does not affect its position on Independent or Restricted.

Not least because pension transfer advice is not actually a product ... the decision, once the anlysis has been undertaken, as to where to transfer to is of course a regulated advice transaction which is likely to include a retail investment product, but the analysis itself is not.

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Jonathan Kirby

Nov 05, 2012 at 10:26

@ Gillian Cardy

Regards surviving on smaller clients, yes it is perfectly possible as long as you have plenty of them and are geared up to look after them.

First and absolute foremost is making sure that they come to see you. That way you aren't wasting time travelling around.

Second, don't keep trying to reinvent the wheel. Because peoples needs are often very similar, it is possible to use the same basic advice many times and just modify and update as and when required.

Thirdly, do service your clients. They will then appreciate what you do for them.

Finally there is no point in being greedy. You need to charge amounts that are proportionate to not only the work undertaken, but the effect that this will have on your client's finances. Thus, although we may in an ideal world like to think we are worth £150 per hour, in reality we will receive far less than this most of the time. After all it is better to charge £300 for a new ISA and then be paid to service it over the years than try and charge the £600 that it would cost on hourly rates and get nothing.

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Gillian Cardy

Nov 05, 2012 at 10:42

@Jonathan Kirby : at last!! A kindred spirit!!

My own business was focussed on smaller clients - and actually it is precisely because their wealth is modest that their overall needs are less complicated and the whole advice process is thus quicker and simpler - and therefore cheaper.

I'm just cheesed off with this all-pervading "aura" that only people with £250k+ will be able to be advised ... the more that the public believes it the more risk IFAs face to their businesses ...

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Jonathan Kirby

Nov 05, 2012 at 11:34

@ Gillian Cardy

I think there are probably more of us out there than you may think but I am pleased that our philosophy strikes a chord.

I just wish the FSA knew what a valuable service we offer and would encourage rather than persecute us.

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dominic browning

Nov 05, 2012 at 12:04

The vast majority of my clients have portfolios lower than this arbitrary £250,000. They seem to appreciate my services and I earn what I consider to be a good living looking after them.

So I heartily disagree with the doom mongers who say all small IFAs are doomed to fail.

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Dan Rear

Nov 05, 2012 at 15:24

Agree with all that Gill, Jonathan and Dominic, state above. My 'average client' has c£70K with me, has been with me for 5-10 years or so, receive (I hope) good ongoing service/advice, and I've never had a complaint. I'm sure the majority of people on here are similar - we work in the real world, and don't make huge efforts to attract HNWers

So why oh why was RDR ever introduced? All that needed to be done was to upskill IFAs to Level 4, and cap comms/fees at 3% + 0.5% trail.

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