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Lords take aim at FSA over RDR advice gap

by William Robins on Nov 28, 2012 at 07:54

Lords take aim at FSA over RDR advice gap

Peers have blamed the retail distribution review (RDR) for creating an advice gap that will leave the poorest stranded at retirement, in a House of Lords debate.

Peers said in a debate last night that the RDR, combined with high pension charges, would hurt savers with small pension pots.

Cross-bench peer Sally Greengross, who led the debate, said the RDR would lead to those on a modest income being priced out of the advice market.

‘There is a big chance that [the poorest] are exactly the set of people who will receive no advice at all, as costs are made transparent and IFAs follow more high net worth clients,’ she said.

‘We must narrow the advice gap. Much more should be done to ensure consumer information is delivered but that must be from a consumer, rather than a compliance, perspective.’

She added that a fragmented government savings policy, split between the work of the Treasury, the Department for Work and Pensions and the FSA, was contributing towards the problem.

Tory peer John Patten added that it was possible for cost-effective investment and advice options to be made available to savers with small pots. ‘We could use the buying power that a million people would have to negotiate for good advice or a better deal when they invest,’ he said.

‘There may be market driven options. They have £2 billion to invest - the market could come up with a process to get a better deal for pensioners.’ Government whip Tina Stowell said the DWP would consider his idea.

Patten also harshly criticised charges taken from pension pots. ‘These charges have just abolished any chance of getting these rates. People talk about the magic of compound interest but [there is a] tyranny of high charges.’

Labour peer Patricia Hollis added that self-interest among pension providers was also hurting the drive to create a savings culture.

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67 comments so far. Why not have your say?

James Melhuish via mobile

Nov 28, 2012 at 08:03

For me there is a huge opportunity here for the right company with the right brand to give simple/affordable Pension advice. Figures from a recent study suggest 32% of the UK are not saving for Retirement. The opportunity is with recently qualified advisers to build their client banks by offering this service, it is a win win scenario

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Bolton Adviser

Nov 28, 2012 at 08:12

Is this not about 3 years too late?

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Nov 28, 2012 at 08:15

One unelected public body funded by you, the taxpayer at odds with.......

another unelected public body funded by you, the taxpayer

Reach for your chequebook

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David Trenner - Intelligent Pensions

Nov 28, 2012 at 08:15

"The opportunity is with recently qualified advisers" ....

That will be those advisers in their 50s and 60s then ...

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Hugh Jars

Nov 28, 2012 at 08:20

'' I don’t know whether this is FSA incompetence or FSA contempt of parliament.’' .....

The word 'Parliament ' can be replaced by any of the following... . IFA's ,Providers...indeed CLIENTS.... in fact anyone or anybody outside of Canary Wharf....

But then its a bit rich when politicians whinge about the monster their own trade body created.....

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Nov 28, 2012 at 08:26

David - that made me laugh out loud!

We know it is too late of course, but as part of getting RDR ready we have had to 'fire' our bottom third of our client bank. You could have argued that we should have done that anyway, but for a time there it was profitable to help them plan for their future.

Now it is not so they had to go. Where they end up I do not know, but hopefully there will be some IT lead, decision-tree type solution for them. I hope that it is not with the banks, but looking at them I don't see them coming out of RDR with any solid plans for the future.

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Paul Barnard

Nov 28, 2012 at 08:26

We must have more advice out there and reduce charges so.....there are even fewer who can afford to give the advice to the people we are targeting. Here's an idea, whack up the price of their alcohol so they can spend the money they have been deterred from spending at the off-licence by increasing their pension contributions. They are bound to do that once we've reduced the charges.

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Nov 28, 2012 at 08:28

.........................another unelected, unaccountable, unrepresentative, uncaring, unqualified, completely out of touch public body funded by you, the taxpayer

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One is afraid

Nov 28, 2012 at 08:39

I woke up this morning and my options were still Independent or Restricted.

Waldorf and Statler have also woken up, now my options are 'Indecided or Constricted'

What a bloody shambles - they better sort something quick or it will drinky - poos time and off on their dear Lordship's Xmas kip. And when they come out of hibernation again - oh dear, nothing's changed.

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Kate Brookes

Nov 28, 2012 at 08:54

It's a bit rich to talk about pension charges and NEST in the same sentence don't you think? It's also a bit flaming late to start moaning about RDR now, where have they all been ,..... asleep?......Surely not.

It's all that comfy Velvet seating in their ivory tower with windows too high to peep out and see what's happening in the real world. Someone needs to turn the heating down and provide hard wooden benches for that lot IMO. WAKEY WAKEY.

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Chartered Mark

Nov 28, 2012 at 08:55

Great. 34 days to RDR and the powers that be notice that after 4+ years of chaos and fumbling the ball, the FSA have delivered a major disaster for the general public.

Also all the Billions of costs of RDR will ultimately be met by the clients, so how do the FSA expect the future of advice to be more affordable than the current level?

All of us, now "highly qualified", IFAs will wring our hands in horror, that we can no longer provide advice to the great unwashed, while creaming in the fees from the people that can afford, and are willing to pay for, the services.

I predict a Leveson style inquest of the RDR disaster within 2 years,, and then the introduction of "RDR 2 - This time it's personal", after another round of expensive wasteful incompetence.

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Brian McQ

Nov 28, 2012 at 08:58

While It's fairly obvious the 'advice gap' is not going to be addressed by RDR, only made worse, it is clear the politicians think a MAS type social service with a NEST style savings option will work (if they could only get it right). I fail to see where they get the evidence for this.

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What Planet am I on today?

Nov 28, 2012 at 08:59

Charges are not the only issue. Performance is an issue too.

The servicing of a client several times per year to keep a watch on performance and to switch funds if necessary to keep on track with an agreed target outcome and changing attitudes to risk is an obvious and (dare I say it) TCF way of dealing with the matter effectively.

But for too long the Regulatory overhead has been so high that any firm servicing all of their clients in that way would almost certainly have been unprofitable. and therefore likley to leave the business. Or non-compliant, and therefore likley to leave the business.

Effective and efficient Regulation is great. It is in everybody's best interests. But the dead, heavy hand of bureaucracy is the main problem. Regulation with less bureaucracy is the solution.

I don't think I'll wait up for it.

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Mad Eyes

Nov 28, 2012 at 09:07

i think another review is required!

Oh and the same time WE have got to reduce charges and fees so that EVERYONE can get advice. No probs, i'll just add to my 'to do' list.

The peers Patten and Hollis are clearly on a different planet and the latter has some nerve talking about self interest!!!!

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Jonathan Kirby

Nov 28, 2012 at 09:11

It beggars belief!

IFA's up and down the country have been screaming this from the rooftops but nobody listened as it was put down to self interest.

The problem is that all the snollygosters in parliament are in the main only there because of their self interest and unfortunately think that everyone must be like them.

The strange thing is we have been managing to look after a lot of these poorer clients for 40 plus years.

The only reason we may have to stop is the deaFSA and their Really Destructive Review.

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Nov 28, 2012 at 09:23

Tory peer John Patten needs to understand the economics of his own figures: a million people.....£2 billion to invest....sounds a wonderful market to tap into doesn't it?

So that's 1 miilion people with on average £2000 each to invest. Deduct adviser fees of at least £500 per person and that means there's £500 million just waiting to be earned by some clever highly qualified IFAs. Kerching ! And from that HMRC can rake out at least £200 million and so everyone's happy ! I don't know why we didn't ban commission ages ago; I expect a million people to be queueing outside my door in January next year

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rick atkinson via mobile

Nov 28, 2012 at 09:28

If it wasnt so serious it would be funny.

How can these morons manage to get things so wrong?

No doubt come Jan 1st the phrase "we told you so" will be banned!

Truly pathetic!

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Duncan Carter 2

Nov 28, 2012 at 09:29

The consistent problem here is that those raising the issues [House of Lords] are arguing with those implementing policy [MP's, civil servants, QUANGOs etc] all of whom are part of a cosy club that is largely funded through taxation.

Hence, no problem for these people to theorise and hypothosise at great length about the problems that simply don't affect them as they spend other people's money in the process.

Arrogance, ignorance, well intentioned - probably all of these.


Chocolate fireguard comes to mind!

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Who ate my sandwich?

Nov 28, 2012 at 09:35

Why is it that the bodies/individuals/authorities that make decisions regarding our industry have no idea what they're talking about? Do you remember 'menus' and industry average commissions? What a waste of time that was. Who was held accountable for the phenomenal amount of money that cost us all to implement only to be scrapped a couple of years later?

Most clients require ADVICE. They need someone to ask them difficult questions about their financial planning and objectives. They need to be informed how much they lose from a pension fund by waiting 5 years before contributing. Those nasty pensions with "high" charges paid for an adviser to do that. Same with protection plans. It's not rocket science.

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Nov 28, 2012 at 09:39

Horse, door, bolted.....put them in the right order!

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Keith Cobby

Nov 28, 2012 at 09:41

I must be missing something here.

You would think that from the tone of the article and comments clients have been receiving free advice over the years. Surely all RDR is actually doing is providing transparency.

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Nov 28, 2012 at 09:54

What advice does someone with only £2000 to invest need? Surely its just - "Put it in an instant access savings account in case of an emergency?"

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Bob Donaldson

Nov 28, 2012 at 09:56

My God have they just woken up in the Lords - You can't make it up this is one of our major legislative chambers and they have just woken up to what is happening.

Ship them all off the jungle!

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Nov 28, 2012 at 09:56

@Keith Cobby

You're absolutely right Keith, these clients have been receiving advice for years and some might say, for free. Of course, what has really happened is that the overall costs of a business have been divided by incomes received from all sources. RDR now means that you can't take more 'income/profit' from one client than another and uniform pricing across all has to be evidenced. The cost of servicing the 'less profitable' clients has in the past therefore, been met in part by the IFA and in part by his/her other activities with other clients....just like PCworld for example. They probably don't make enough from me when I buy a packet of printer paper but can absorb the costs of serving me by selling you a new laptop for £1000.

Transparency is a good thing and I haven't heard anyone on any forum or in any article denouncing it. However, it's the fact that choice has been removed from what we can do for clients and what clients can ask of us...in an affordable way.

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Nigel Barker-Smith

Nov 28, 2012 at 10:07

Don't like RDR? just wait for RDR 2!

Banning advisor charging will be next, so only direct payments from clients not products at all.

Then we can have a truely professional and transprent industry.

Don't believe me, it happened in Holland.

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Nov 28, 2012 at 10:10

@ Nigel Barker-Smith

And they (Holland) legalised prostitution so perhaps we will be offered payment in kind....but then haven't we already been given an STD by our regulator...RDR, will let you decide what RDR means in the 'seedy' side of life!

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Who ate my sandwich?

Nov 28, 2012 at 10:22

Really Dirty Rash??

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Craig Payne

Nov 28, 2012 at 10:24

Incredible to think that the House of Lords is so poorly informed on this issue. Perhaps they got their information from the FSA?

It seems that anyone working in financial services who tries to explain their viewpoint is labelled as dastardly and self interested so instead we end up with a load of bureaucrats stumbling around the issue and trying to force their square peg solution in to a round hole! To think we (our clients) are paying for this mess to be implemented is horrifying!

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Jonathan Kirby

Nov 28, 2012 at 10:24

@ Keith Cobby

Cross subsidisation happens throughout every walk of life and particularly in government.

If it didn't everyone would pay the same level of taxes regardless of income, but cast your mind back to the 'fair' poll tax system that Margaret Thatcher introduced.

They soon changed their minds on that when the riots started.

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sol trader

Nov 28, 2012 at 10:25

All is not lost. I was reading the MAS website last night. In 2013, when all charges are transparent and IFAs are gone, the banks and Building societies (or "product providers") will possibly be offering an information only service where no fee is charged. It might appear you are receiving advice because you will be talked through the Key Features. The "adviser" will not carry out a fact find or find out about your personal details. You also have fewer rights of redress and, joy of joys, COMMISSION is still payable.

So, the masses don't need advice, they need information provided by Banks, Quangos, politicians and run on a commission basis. They also need to be auto enroled into investments without anyone taking note of their personal circumstances, placed in funds run largely by overseas companies who may or may not pay much tax in this country. Hopefully, Deloitte will still be paid to carry out the odd bit of research to keep their lordships informed about how to think.

Chapeau to the RDR lobby, good job. Now, where can I get some free DIY advice on penny shares or completely charge free ETFs without any advertising bias?

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Nov 28, 2012 at 10:32

Interesting that the focus should be on charges when the majority of personal pensions and SIPPs can now operate with AMCs of 1.5% and TERs of less than 2% with advice being provided yet NEST has an AMC of 0.3% AND a contribution charge of 1.8% with no advice! Oh and as MPs/Lords what exactly is the cost of the pension they receive?

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Nov 28, 2012 at 10:36

OK so transparency is a good thing. But is commission intrinsically bad? Would it not have been better to focus on ensuring that charges are not unacceptably high?

A few years ago I attended a seminar run by the FSA. A member of the FSA Board was in the audience and he stood up to say that the ‘man from the Pru’ had to go because the costs / charges to customers were too high…

Years later RDR means that some clients have been ‘fired’ because they will be uneconomic..

Ensuring that charges are at acceptable levels is one thing – but is getting rid of ‘the man from the Pru’ and banning commission the answer? I don’t think so.

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Mac Kot

Nov 28, 2012 at 10:38

Better late than never.

Only beneficial though if a change is made even at such a late stage!

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Julian Stevens

Nov 28, 2012 at 10:53

To an extent I agree with Keith Cobby, but the primary causes of advice already having become unaffordable for people of modest means are the endlessly escalating costs for IFA's of remaining in business and available to provide advice to anyone. In addition to four tiers of regulatory levies (plus, at the behest of the FSA, ad hoc additional FSCS levies in the wake of every other provider failure), consider what's required these days just to recommend and arrange a simple ISA:-

1. FactFind,

2. Risk Profiling Questionnaire,

3. provider research,

4. fund selection,

5. an unfathomably complicated illustration (that has very little relevance to what's actually likely to happen in the future) and then

6. a recommendation letter at least 20 pages long.

On top of all those things, the FSA's never ending catalogue of hindsight reviews has pushed up PII premiums year after year.

Charges aren't what's poisoned people against locking away money in a pension plan ~ the reasons are complexity, endless government meddling and moving of the goalposts, not to mention the government having reneged totally on its promise to to undo all the damage done by its predecessors over the past 25 years and, the biggest one of all, the cursed annuity rates trap, about which the government refuses to do anything. NONE of these is the fault of IFA's. When was the last time we heard anything in the way of good news about pensions? It's all relentlessly BAD news, enthusiastically promulgated by the media.

The FSA is so inundated by its own red tape and bureaucracy that it can't even come up with a procedure to make shopping around in the open market the default option at retirement. Wouldn't a good starting point be to ban providers from quoting their own annuities as plan holders approach the vesting date of their pension funds? Uhhh ~ no, too simple that one. If there's a messier and less clear-cut option, you can get your boots that, as always, that'll be the one the FSA goes for.

Excessive pension plan charges is a historic not current problem. Auto-enrolment workplace retirement savings schemes will do nothing to address public mistrust of and antipathy towards retirement saving.

But hey, ho ~ rather than identify the real causes of the current state of affairs, a much easier option is to blame the lack of affordable advice on industry and on those attempting to pick their way through the minefields of legislation and regulation.

Professional services have to be paid for and those who provide them will not cut their prices just because a bunch of politicians and regulators think we ought to be doing more and more for less and less.

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Nov 28, 2012 at 11:00

Julian Stevens for president!

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Nov 28, 2012 at 11:01

@Julian Stevens

That was a compliment from me by the way!

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Mac Kot

Nov 28, 2012 at 11:10

Explained Brilliantly Julian.

Research for an ISA can be approx 180 pages if Co-Funds platform is used

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Geoff Catterall via mobile

Nov 28, 2012 at 11:21

@ Julian Stevens

I agree with you 100%......

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Julian Stevens

Nov 28, 2012 at 11:53

Thank you gentlemen. Of course, I forgot to mention all the KIID's that we have to issue as well (for which we have Brussels to thank). How long does it take to get together, say, ten of those and then attach them to an e-mail? If the client doesn't have e-mail, you have to print them all off and include them with your letter of recommendation. Crazy. I'm not saying they aren't relevant or informative but really, on top of everything else, just how likely is the client actually to read them? And if the client/s are investing only a bit more than their ISA input allowances, you have to add another few pages to explain non-ISA Unit Trusts and future Bed & ISA'ing strategy. As a result, it's not long before your recommendation package is knocking on towards 40 pages. With this kind of burden, how can financial advice possibly be remotely affordable for the masses of modest means?

When recommending a pension plan, for example, we have to add an addendum outlining all the At Retirement options. If anyone in a position actually to get anything done (not least Steve Webb, my opinion of whom cannot be expressed in polite terms) would take any notice of my proposals for a Retirement Income Bond in place of an annuity rates based product, all that could be swept away at a stroke, not to mention the knock-on benefits to the economy of liberating many millions of pounds of taxable and spendable income into the economy.

These people need their heads knocked together.

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David IFA

Nov 28, 2012 at 12:04

Too late ! Too Late ! I wrote to my MP 2 years ago warning them of this very point when debate was strong. My MP passed my letter to that ignoramous Hoban, who threw my comments to one side. The repercussions have now started on RDR and its failings. Hey and the culprits have left the building for pastures new. So next thing will be "Its not our fault, it was set up by our predecessors,but we will fix it" Tell you what i can write the script now for you- watch this space.

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Derek Gair

Nov 28, 2012 at 12:19

So can I David !!

I can also write the script as to where the providers are heading when the balance sheet collapses !!

Do I feel smug though ? no i dont just bloody sad !! and I wont tell all the RDR exam/fee/wealth manager junkies 'told you so' either !!

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Marty Bar

Nov 28, 2012 at 12:58

Remember the departing words of "Sector Pants". It was before my time, not on my watch, I'm not responsible and you can't hold me responsible for the Shxt I leave behind. "Hugh Grant" stated today that the "press" are the only body who are self regulated. He needs to get out more often because there are a few more bodies out there who are above the law. Isn't it strange how power and coruption seems to go hand in hand?

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Marty Bar

Nov 28, 2012 at 13:00

oops need another r in corruption

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John Frink

Nov 28, 2012 at 13:26

'Advice gap'?

So the argument is, it's better to have everyone recieve advice - even if the advice is rubbish and delivered by borderline fraudsters - then to have an elite group of advisers that provide services only to those that actually have money to invest?

Right...if you think this through RDR clearly works, well, unless you are a lackwit that can't agree a 3% initial fee with a client deducted from the investment...

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Philip Wise

Nov 28, 2012 at 13:32

Conclusion is correct that poor people cant afford advice. But they never could and RDR doesnt change that.

There's nothing in RDR to prevent wealthy clients from cross-subsidising poor ones and the old 3 plus a half if you go ahead will continue. It's just called something different.

RDR isnt the culprit.

The main culprits are a fear of our future ex-clients lawyers, and years of complication being added to pensions by the very hypocrites who are now complaining about it in the Lords. Plus, of course, the Pensions Ministry being a vehicle for self-promotion.

Ask any GP, and you will find that they complain about the same things - that a lawyer will persuade their patient to complain about an honest error of judgement, and that meddling politicians have prevented them from doing their job.

I think that goes for most of the professions, and most other businesses too. Entrepreneurs are prevented from growing the economy by the stifling bureaucracy and the fact that any money they make is syphoned off in tax or paid to some other unnecessary bureaucrat (for us, its the FSA, MAS, Information Commissioner, DTI, but any other profession can give you a similar list).

Fresh politics are needed to rid us from the scourge of professional politicians in cahoots with a corrupt media, and give our economy the chance to grow.

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Nov 28, 2012 at 13:50

@ John Frink. Are you suggesting that advisers that were to tied to the Prudential and the like were all 'borderline fraudsters' ?! And that their advice and the policies they sold were all rubbish? Surely not. Will IFAs under RDR be 'an elite group'.....?

This subject clearly excites very strong emotions and hyperbol!

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David Moore1812

Nov 28, 2012 at 13:53

When 80% of your income comes from 20% of your clients it makes sense to get rid of the unprofitable clients who are a dead weight.

No IFA can afford to carry these clients any longer.

It's purely a commercial decision.

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Julian Stevens

Nov 28, 2012 at 13:55

Lackwit? Love it.

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Julian Stevens

Nov 28, 2012 at 14:25

To David Moore ~ We've been asked about client segmentation as, like you, the majority of our turnover comes from a minority of our client bank. My thinking is that if you can review each of our small portfolio clients just once a year in less than half an hour (valuation, performance update, recommendation for a fund switch or two), then they only need to be contributing about £75 p.a. to your top line to be just about worth keeping. It's all grist to the mill and every so often one of them comes into some extra money or they need advice on vesting their pension fund/s or they refer you to somebody else. I wouldn't actively go looking for nickel and dime clients, but I'm not ready to ditch those already on our books.

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David Moore1812

Nov 28, 2012 at 16:03

To Julian -

We have segmented our clients.

We divided them up into seven groups according to the income generated and starting with the lowest and working upwards we have reduced the number by about 50%.

We wrote to each client giving them the opportunity for a review and if no response we wrote to the Insurance Companies requesting them to deal directly with the client.

Like you, I have been around for many years and whilst I agree with the philosophy 'from acorns mighty oaks grow' the reality is that the low income producing clients cause us more work and are being cross subsidised.

In order to survive in the future there must be a cut-off point.

Realistically, probably, about £ 150 per annum just to keep them on our books.

If the client required advice they would be charged on a time/cost basis.

Our time is better spent on finding clients who do want the service we offer.

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Philip Melville

Nov 28, 2012 at 16:32

It is fascinating that removing commission has turned everyone into a cost concious wit !

What has changed about running a business just because the client now has to pay ?

Didn't you know how much it cost to run your business ?

Surely the ludicrous network cover your bum paperwork hasn't just come about because of the RDR ?

Were all of the little people OK sitting in your business when you could get paid by commission or were you just being kind keeping them warm ?

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all-is-not-lost via mobile

Nov 28, 2012 at 16:48


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Nov 28, 2012 at 17:21

Tyranny of high charges?

Sorry i thought the IFA community had spent the last ten years making a good living ensuring their clients were not in high charging plans. or I have missed something. i thought anything under 1.5% amc was the sort of bencjhmark?

So where are all these customers being charged more than that, or am i just naive?

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Nov 28, 2012 at 18:15

Yes AP, I agree good IFAs have worked hard to keep charges fair and to offer value - but higher charges than those you quote are not uncommon, plus high initial commission (4% +)

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Richard Hardy

Nov 28, 2012 at 18:24

RDR will take the industry back 40 years.

Those with money and who can afford fees will have their own adviser.

Those who can't afford fees will get a visit from the 'Man from the Pru'.

Once again Julian hit the nail on the head.

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No name7

Nov 28, 2012 at 20:10

I agree with Nigel Barker-Smith.

The main problem with Adviser Charging is that it only creates a level playing field between contracts providing Adviser Charging.

For example, Invesco Perpetual and I believe most other fund houses do not have any plans to implement Adviser Charging. Therefore, although it would be cheaper for a client to invest directly with Invesco Perpetual (on a like-for-like fee/adviser charge basis) than via most if not all platforms, many IFAs will not recommend a direct investment with them post RDR because they won'y get paid any initial Adviser Charge or any ongoing Adviser Fee.

Another example is Stakeholder pensions. Advisers are supposed to consider a stakeholder pension before a personal pension (rule RU64) however none of them can pay an Adviser Charge (by definition), therefore I believe many IFAs will not even consider them for that reason.

The exception to the above are fee charging IFAs.

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Green Eyed Monster via mobile

Nov 28, 2012 at 22:19


Surely all advisers will be fee charging from jan 2013?

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Ian Lees

Nov 29, 2012 at 05:32

If they are worried about the poorest who have attempted to save for additional income in retirement using vehicles such as pensions, and their reliance is on one product sold by e.g an insurance company such as Scottish Widows - in SERPS, or minimum levels of savings - the high charges along with poor performance - and then being cheated out of their funds by the Trustees of Scottish Widows Retirement Benefits Scheme ( i.e The Directorsand Chairman incl Finance Directors past and present) with the assistance to defraud pension beneficiaries by Aegon ( Scottish Equitable ) - it is easy to see why no consumer would wish to invest in such a tardy vehicle. The lack of transparency - the Breaches of Trust by Pension Scheme Trustees at Scottish Widows and Aegon are at best extremely unhelpful - and their on going failure todeal with these issues - a demonstration for their contempt against pension scheme beneficiaries - trying to save for their income in retirement. No winder Scottish Widows compliments the " journey " with Edinburgh based bank TSB - a journey of deceit and destruction of consumers savings !

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Nigel Barker-Smith

Nov 29, 2012 at 13:28

Well anyone doubting my controversial comments on this blog yesterday at 10.07 might want to read this link published today.



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Paul Barnard

Nov 29, 2012 at 13:54

@ Nigel - but that relates to commission rebates, not adviser charging, which is not the same thing.

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Nigel Barker-Smith

Nov 29, 2012 at 16:29

@Paul - OK, but let's not waste each others time clarifying exact points, the overridding point is transparency together with the logistics of how advisors are paid will soon become only a client/advisor relationship without ANY payment (authorised by the client or not) coming from a financial product.

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No name7

Nov 29, 2012 at 20:34

@Green Eyed Monster

I appreciate that it would be called fee-deducted-product, however I believe many so-called Independant Financial Advisers will only recommend Adviser Charging enabled products. Therefore, they if a client came to them with, for instance, £10,000 to invest they would not recommend an Invesco Perpetual ISA they would only recommend a platform/wrap which can pay them an Adviser Charge of "three plus a half".

I've seen it happen already. I've seen IFAs re-register their clients existing investment over to platforms just in case the client swithes funds in the future which will (in the case of Invesco Perpetual) switch off fund based commission (regardless of whether the fund switch was authorised or not).

Don't get me wrong. I've nothing against platforms. I have all of my pension money invested via a platform. Access to a wide range of funds and consolidation etc is a great thing. What bothers me is funds being transferred over to platforms at a higher ongoing charge to clients, not because its in the clients interests to do so but because its in the IFA's.

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Philip Melville

Nov 30, 2012 at 11:15

Adviser Charging inevitably means Restricted to those providers and products willing to facilitate Adviser Charging. Other definitions of Independence fall by the wayside with Adviser Charging administered by providers.

These silly games and alternative names around remuneration must quickly perish as providers struggle to implement them even on a carefully chosen range of capital products.

Thank goodness for transparency when you look at the wriggling within the industry to try and fudge the remuneration issue.

Roll on next year.

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No name7

Dec 01, 2012 at 09:09

@Phillip Melville

If Adviser Charging was banned and financial advisers had to charge clients directly there would be true independence.

By introducing Adviser Charging, the FSA has created a situation where there is product and provider bias in favour of those products and providers which support Adviser Charging.

Financial advisers will still wear balaclavas but just a different colour.

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Philip Melville

Dec 01, 2012 at 09:24

Adviser charging will fail simply because of the incompetence of providers.

There will be no need to ban anything as transparency will expose the incompetents in this industry on all sides of the debate.

There is a huge difference in the skills needed to create wealth and those currently used to exploit the greed of people who already have capital.

The churning days are almost over as are the silly upfront charges which most will not have the skills to justify.

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Ian Lees

Dec 01, 2012 at 11:24

The unintended consequence of RDR ( or perhaps it is intended ) is that the real issue of competition has been reduced in favour of the few large companies who can currently afford to compete. Advisers are going to be restricted to those consumers who wish to pay - and the commodities ( the vast array of client banks ) will be open to exploitation by those who " own " them - and apply forceful strategies which are immoral - to force consumers to purchase theri products - thereby removing competition or the open market facility . . . or choice. How is this different from today's market ? We have insurance companies sponsoring the CII and PFS - to such an extent " to sell theri products ". There is nothing wrong with the sale of an insuranc eproduct if it provides protection such as car house or flood . Why is life assurance or Permanent Health Insurance so different ? The benefits of protection policies remain ! These policies keep families and businesses together in times of catastrophe. Removing the incentive to sell - means sales reduce. . . . . a heavy reliance on the benenfit system - for which those working and paying taxes ( not certain coffee companies ) support the community, and the government. Instead of getting hung up on commission - why does the FSA not get committed to the provision of protection and the accurate delivery of service i.e Independent or Tied - not multi tied not " almost whole of market " - these are the activites of sales and marketing companies who exploit their commodities - their client bank !

But to be frank I would rather we had sales an marketing insurance companeis - than banks intruding and destroying theri clients life savings - let banks do what they do best ( apart from fiddling Libor and reckless lending ) - the business of a bank is money lending - not selling ancialliary products - becasue they can apply undue influence against their client - without commitment, or a real reason for the client. The sale of a product must be of benenfit to the provider the customer and the salesperson.

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Dec 01, 2012 at 11:58

There was a lot that was good about the days of the 'man from the Pru' (as I intimated on Nov 28). More people of modest means saved and more people had protection products, as you pointed out Ian Lees, 'to keep faimiles and business together in times of catastrophe'. Commission is not the root of all evil. It is a shame that the answer to problems always seems to be to scrap what went before instead of mend what is wrong with the current system. Doubtless it is partly (or perhaps wholly?) because of the tendency for new brooms to want new shiny legislation.

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