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SJP and Standard backed as RDR winners

by Alex Steger on Jan 08, 2013 at 08:31

SJP and Standard backed as RDR winners

Standard Life and St James’s Place (SJP) are the best placed providers to benefit from the retail distribution review (RDR), according to analysts at Investec.

In a note to investors Investec described the RDR as ‘the most significant change the life industry has ever seen’.

It said the two companies best positioned to cope with the regulatory changes were SJP which it said ‘uniquely’ had ‘an internal sales force’ and Standard Life which had formally ceased paying commission since 2006.

Investec also backed Aviva to enjoy a good 2013 due to the arrival of new chief executive Mark Wilson on 1 January and the restructuring plans begun by chairman John McFarlane during his time as interim boss following the departure of Andrew Moss last year.

There was less good news for Legal & General and Prudential, which were tipped to face more challenging times.

L&G might struggle as the RDR was predicted to have a bigger impact at the ‘everyman’ end of the market, the note said.

SJP was backed to be a winner.

The note said: ‘On balance, the upheaval in the UK life industry that the RDR is likely to induce should largely bypass the company.’

‘The focus on a mass affluent customer base should significantly insulate the company from the difficult economy while having an in-house sales force should mean minimal RDR disruption.'

Standard was also tipped to succeed due to the fact that in 2006 ‘it adapted its product offerings to a capital-light and commission-free model’.

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30 comments so far. Why not have your say?

Paul Barnard

Jan 08, 2013 at 09:01

Not quite what the clueless from Canary Wharf had in mind methinks.

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Jan 08, 2013 at 09:04

"SJP which it said ‘uniquely’ had ‘an internal sales force’"!!!

What is one of those then? Thought RDR was meant to improve the advice process and weaken the sales environment for financial services.

Have I got that wrong?

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Sam Gee

Jan 08, 2013 at 09:05

Agreed Paul. In a funny way I can see how Investec reach this conclusion re SJP. As independent advisers it is our job to demonstrate the value we have in providing a service over an "internal salesforce" making a sale. Even if it is an "upmarket one"!

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Darren Cooke via mobile

Jan 08, 2013 at 09:05

Interestingly no mention of how the banks will fare with their wealrh advice propositions

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Glint Thrust via mobile

Jan 08, 2013 at 09:06

....or was it?

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Jan 08, 2013 at 09:26

Bob Donaldson

Jan 08, 2013 at 09:28

The merry go round keeps going. I though sales forces were abandoned many many years ago. Perhaps this is what is now going to happen, in order to distribute product we will go back full circle to a sales forces in whatever guise it takes.

This will make it easier for the regulators in the long run which I believe is their end game. Large sales forces which are accountable to a parent and easily organised and regulated.

Didn't we have this in the days of Hambro Life, Imperial Life of Canada, Abbey Life et al.

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Jan 08, 2013 at 09:29

how has RDR worked when companies like Forester Life, who say they don't give advice, however their salesman are called "financial advisers", they give their "financial advisers" targets to justify salaries and when targets are achieved, they receive a bonus????

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Jan 08, 2013 at 09:31

Folkes, remember that Investec is looking at quoted companies for research reasons. As only a very few proper IFAs are listed, then we do not appear on Investec's research radar. So only restricted companies are being analysed. Who knows if SJP will be better off, however the FSA must ensure that the word 'restricted advice' must appear in large letters on att correspondence, web-sites and other customer communication prior to ant meeting. Once a sales person has the first meeting it is too late, and typical spin can be applied to their status, stating the restricted status means they specialise in a selected tranche of investments rather than the others who advise on everything but are masters of none.

Deal with it quickly FSA, please, if only to protect your original vision.

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Keith Cobby

Jan 08, 2013 at 09:50

I don't think referring to advisers as restricted or independent will help. It seems to me if a firm offers its own in-house range of investment products then those 'financial advisers' are really financial salesmen. I have no problem with this as clients can move if they are not satisfied with the service.

The FSA need to demarcate firms between those who are financial planners, paid on a fee basis (up front or monthly direct debit ie no commission or adviser charging) and financial salesmen who are promoting their own range or are effectively tied/multi-tied.

Polarisation was the first attempt and RDR is moving things on a little but it will take one more heave to finally sort it out.

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Sir AA

Jan 08, 2013 at 10:01

Hickky, you are right in flagging up the fact that Investec's research focused on listed companies.

My guess is that the research was based on "recommendation" notes they want to issue to private investors as to which company's shares to buy, sell or hold in the FS sector in 2013.

I won't lose any sleep over such reports as they historically largely meaningless although they do make an interesting short-term headline.

Only time would tell, which providers and advice business would weather the storm of RDR profitably.

Stay focused.

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Jan 08, 2013 at 10:16

Why do we as IFA's continually deny that we are in sales, what else is advice but selling a concept, an idea, a plan? I don't know about others but we still actively seek new clients by marketing, referal I haven't noticed too many banging on the door asking for advice. I agree that RDR has probably backfired that it seems to have so many holes in it that companies like SJP can plough straight through it and carry on regardless. However we are where we are and to wish otherwise is pointless. If you came into this business now you would look at the successful companies and SJP is successful and see what you can take from their success and apply to your own business instead of constantly moaning about them. Not a popular view I know but It concerns me that unless we accept things how they are that we are doomed to be a cotttage industry with no influence over the way our business is regulated.

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Jonathan Kirby

Jan 08, 2013 at 10:50

Given that the latest figures I have seen are that only around 27,000 SPS have been issued by the end of 2012 all life companies are likely to struggle with 25% less potential introducers.

If we also bear in mind that many of the 27.000 will be on a restricted panel basis one really wonders why they all acquiesced so readily.

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Whatever happened to disclosure?

Jan 08, 2013 at 11:06

Hickky remarks that swift action is required by the Regulator if their original vision is to be protected.

That rather flatters them I fear, in that it supposes that they ever possessed such a thing in the first place!

The fact that SJP will emerge 'winners' from something is in itself no surprise. After all there are many very clever people within that organisation tasked with nothing but that very end. What is a little disappointing to me is that the much vaunted RDR was surely aimed at just these type of businesses, whether they be genuine IFA's or firms who have traded on misinformation so as to have their clients believe their proposition to be 'equivalent to', and yet it has allowed the largest one of all to drive a bus through the whole thing.

I have to applaud SJP, grudgingly, for yet again running rings around 'the plod' and continuing to line the pockets of their people and their shareholders while the rest of us cope with the shambles that is being an IFA in the 'brave new world' .

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Bridge North

Jan 08, 2013 at 11:25

Why be surprised.

The RDR created an uneven competitive environment.

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Jan 08, 2013 at 11:26

"how has RDR worked when companies like Forester Life, who say they don't give advice, however their salesman are called "financial advisers", they give their "financial advisers" targets to justify salaries and when targets are achieved, they receive a bonus????"

Had never heard of Forester Life until a letter arrived on my door telling me my childs Friendly Society plan with the Tunbridge Wells Equitable was about to be taken over by them.

More importantly this means that an old " non commission paying friendly society mode" l still cannot cope on financial strength in todays regulatory landscape.

If the PLC model that banks followed is even more flawed and caused the financial mess, what is the regulator solution. Answers on a postcard please?

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Jan 08, 2013 at 11:43


I believe the FSA had a vision for RDR, and it consisted of two main elements:

1 To nearly eradicate the sales of Capital investment Bonds which it viewed as poor value for investors as the level of commissions could be far higher than collective investments. The fact it's own subsequent enquirey concluded there was little measurable differences between the two meant their assumptions on charges levied by the insurance companies and the collective fund managers were flawed, and overall charges on collectives were higher than disclosed. This bias against CIBs could have been addressed by applying a maximum commission on CIBs as well as having a common, truthful charging disclosure regiem for both sides of the industry.

2 To address the poor advice being given by sales oriented rather than advice oriented firms. Whilst agreeing any company needs to make a profit in order to survive, the poor advice given, particularly to the elderley, by large target driven firms, was creating loads of complaints which was flagged up as an issue. Increasing training standards was considered a method of preventing an 'ignorance' defence. However the FSA had no real expertise in implementation, and reverted to the tick box methodology so beloved by beaurocracies everywhere as it requires no expertise in the checkers, and absolves the regulator of blame as far as their limited vision can see. However rigid rules are bound to have clever minds hell bent to circumvent them. Vis SJP and Towry not disclosing status on websites etc.

But take no notice of the above article, it was only published to get a reaction from us poor gullable readers. It bears no semblance to reality as we all know the biggest winners from RDR will be the smaller IFAs who give good customer service, charge a reasonable sum for their services and do not attempt to sell 'get rich quick' schemes that benefit advisers more than their clients.

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Christopher Petrie

Jan 08, 2013 at 11:46

Just on the 27,000 SPS's issued to date, that figure doesn't include one or 2 of the RPBs allowed to issue them and more importantly, advisers have 60 days from 31 December to actually get their SPS issued after applying for one.

It would seem from what the SPS providers are saying that the full number will be around 32,000 SPS's issued. There were around 37,000 advisers in 2012, including bank advisers; obviously not all SPS holders will be giving financial advice, but it does seem that most IFAs (e.g. 90%) seem to have got their SPS or will have by 28 February.

All those previous claims of 50% of IFAs dropping out do seem - unsurprisingly - to have been hysterical over-estimates. Mind you, the banks have cut back a great deal - they seem to be in the weakest position from the new rules.

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Jonathan Kirby

Jan 08, 2013 at 12:02

@ Christopher Petrie

Hopefully Citywire will come up with something definitive in due course, but as to the number of IFA's, our network has found 40% have moved to restricted of one flavour or another and if PI cover increases for full IFA status as expected, then a whole lot more will make the move I am sure.

Yet I really don't see what RDR has achieved other than destruction of an industry.

No wonder the economy is in the doldrums when you have what amounts to the government actively trying to destroy a large chunk of the service sector.

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Dan Rear

Jan 08, 2013 at 13:23

Quite right JK. I've felt for a good while now that Government, of all 3 parties has had an anti-business agenda. RDR is another example of interference in the free market.

If some businesses wanted to become fee-based and hold themselves out as 'more professional' ,Chartered or whatever, good luck to them. But that model should not have been imposed on the whole sector. Let the market dictate which businesses thrive and which don't.

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Robert Lallo

Jan 08, 2013 at 13:24

I was a partner at SJP, brilliant business model and fantastic marketeers, however essentially a very successful direct sales organisation who deserve some credit for getting it right most of the time. The problem I had with them is that they pretty much take a one size fits all approach, coupled with above average charging structure and limited panel of funds. It was not for me, much happier being an IFA having total freedom on platform,provider and fund choice. Ultimately far better for my clients. SJP will always be Allied Dunbar with a top hat on! but nevertheless hugely successful at what they do, so hats off to them (pardon the pun).

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Mr B-Mused

Jan 08, 2013 at 13:49

This is a different matter, but given lot's of you are discussing this article, I wish to seek some collective wisdom. I am intreged as to what HSBC are charging for financial advice in a post RDR World. Their website states that they are commited to clear...charges yet they can be found nowhere. I called them up, but they would not give me any details over the phone. They clearly want me to see one of their sales people first. Any idea what they are hiding from me?

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Compliance Officer

Jan 08, 2013 at 14:04

I hold no brief for HSBC but I can see why they wouldn't want to give details via a phone call given the potential complexities.

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Mr B-Mused

Jan 08, 2013 at 15:00

They should have a menu of costs. I appreciate that some complex arreas may need more thought. But do they:

1. Charge a % of funds invested?

2. Charge based on time, if so, what are their hourly rates?

3. A mix.

Pretty simple really, if they were committed to openness, these would be easily accessed on their website or there should at least be a pdf terms of business available.

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Jonathan Kirby

Jan 08, 2013 at 15:03

@ Mr B-Mused

I have banked with HSBC since the 1960s and have never been tempted to buy any of their products for myself or clients other than I did use their Mid 250 tracker a while back but Schroder's fully managed version blew it out of the water.

However, a while ago I had more money than usual in my current account (it was on the way elsewhere) and low and behold I had a phone call from a client relationship manager who suddenly decided that they ought to get to know me better.

After a bit of spiel about how they could help me I asked if she knew what I did for living. Of course they didn't (as I say only been with them 40 + years), and when I explained, she still didn't grasp what an IFA is and that I would be very unlikely to buy an investment from them given I have the full marketplace at my finger tips.

The girl was clearly brainwashed by HSBC to thinking they have the best products in the market.

As to how they are charging, many products will still have commission if they are not 'advising' and many others will generate profit for them as an organisation.

My advice, find a good IFA or Restricted Whole of Market adviser and leave all the banks to their own devices.

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Christopher Petrie

Jan 08, 2013 at 15:17

@ J Kirby, your Network has a higher than average number of moves to Restricted, if 40% have done so, as you suggest. But even if that's the case...so what? They're still giving financial advice, they may likely even be Whole of Market Restricted. Or maybe they've just been pushed into acknowledging that they were Restricted all along.

Whatever the reason, if an IFA has been re-labelled as Restricted, they're still in business, still offering financial advice and still ongoing. I still can't see any real proof that RDR has "destroyed an industry". Changed it, maybe, but life seems to be going on as I sit here now......

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Jonathan Kirby

Jan 08, 2013 at 15:29

@ Christopher Petrie

Life is going on here as well. A lot of hassle and no change as without realising it we were already RDR ready in many respects before they even dreamt up the idea.

What worries me is the number of good advisers who have called it a day.

Yes they have sold client banks, but most will cherry pick the larger cases and leave the rest to their own devices.

Over the last twenty years there has been a massive decline in the number of providers and it is set to get a whole lot worse.

Bearing in mind the number of IFA's like myself in their 60s who will be retiring shortly and the near impossible task of replacing us due to the traditional avenues closing I would guess that 50% destruction is a severe under estimate.

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Jan 08, 2013 at 16:51

Whilst products,charges,fund selection and numerous other pieces of the jigsaw have an influence over a clients selection of adviser SJP highlight that it's the relationship that clients buy.

If the adviser community can offer the same level of trust and relationship with their clients then I can't see SJP as a threat to their business. If the client does not have that relationship then there is a distinct possibility that they will buy the inferior and more expensive solution as a trade off for piece of mind.

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Paul Barnard

Jan 08, 2013 at 22:16

I have just been looking at my Facebook page. On there was an advert from Grove Pension Release which told me that they were independent financial advisers, gave advice, didn't charge me a fee and were paid by commission from the providers.

How can they get away with this?

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Whatever happened to disclosure?

Jan 09, 2013 at 11:48

@ Paul Barnard

How indeed?

Sorry to be a cynic, but my take on this is that RDR, like similar reforms before it (Commission Disclosure comes to mind) will be taken as meaning different things to different firms. Some, who have chosen in the past to operate in a cavalier manner and charge in an opaque and unfriendly manner will probably continue to do so, while at the same time saying that they embrace the changes.

As ethical professionals, we have to hope and believe that the Regulator will deal with them swiftly and appropriately.

My guess is that, as before they will not and these people will continue to get away with misrepresenting themselves and charging in a manner that is inappropriate to client needs and to current requirements for years to come, while the rest of us jump through pointless and expensive hoops in order to try to preserve the businesses we have built up through years of work. The people not playing the game, on the other hand will probaly make their fortune from selling these products inappropriately and then move on and be selling software / double glazing / cars / payday loans / mobile phones or some other snake oil in a few years' time.leaving us with the Regulator's clamp down that results.

It's most definitely not fair, but the industry has signally failed to clean its act up sufficiently over the years and so it should be no surprise that we end up with this over reaction now.

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