RSM Tenon blames RDR for slump in advice business

I don't think the problem is the RDR per se. Rather, it's the way in which the FSA has propagated the message that commission will be replaced by adviser charging without emphasising the fact that the cost of intermediation can still be packaged within the sum/s to be invested. As a result, many members of the public are fearful of having to pay additional fees which they fear may be as sizeable as those charged by solicitors.

Had the FSA properly thought things through instead of charging ahead like a bull in a china shop, it would have said that:-

1. Commission-based advice has never been free, as far too many people have blithely assumed.

2. Too many intermediaries have exploited this ignorance to over-charge their customers.

3. Customers will retain the option for the costs of advice to be packaged within the sum/s to be invested.

4. Providers will no longer control how much intermediaries receive for their services.

5. Instead, the amount payable to the intermediary will be a matter for agreement between the customer and the intermediary.

6. Intermediaries will be required to articulate just what they're providing for what they propose charging, both at the outset and on an ongoing basis.

7. Though customers may not pay any less for the services of their intermediary (though in some cases they may do), they'll know exactly what they're paying, by what mechanism and what they'll be getting in return.

Question: Why didn't the FSA formulate a more positive and constructive way in which to communicate its RDR message?

Answer: Because the FSA always thinks it's right and that it doesn't need to consult anybody about anything.

All true, but we're now sending out a clear (I hope) letter to all our clients explaining the changes and asking them to sign the new Client Agreement.

I can't tell the whole of the general public about the changes, but I can make sure my own clients understand. What the FSA does about the rest is up to them, not my problem.

I think you will be surprised at how few products will allow advisers to control their own idea of charges. More likely they will simply offer a menu of charges - determined of course by the provider. Or nothing if that is what suits the provider.

Julian Stevens for FSA CEO!

That's exactly the point and when explained to clients in that manner the initial shock that they have actually been paying for advice all along soon wears away. The whole message of RDR becomes quite clear.

The realisation can practically be seen in their faces when they understand and see the value and the benefits of transparency including the fact they can truly trust in their belief their adviser is working for them without any commission bias.

The staggering thing is that the regulatory body that drives these changes, that not only effect the businesses involved in this industry (across the board as a whole not just IFAs) but also the consumers (who have been the reason for the driving force behind the changes) have not been consulted in any way.

I understand there might not be a suitable consumer group to involve but there certainly should be an industry one as those on the front line dealing with the very people this effects see these people on a day to day basis. They are perfectly placed to see how to formulate and implement these changes in the most practical way possible.

Not that many consumers would know where to look but the FSA have produced a communication for consumers.

http://www.fsa.gov.uk/consumerinformation/product_news/saving_investments/changes-financial-advice/how-changing

Download the "Financial Advice Changes 1-2-3" PDF in related information on that page.