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What the UK’s wealthy think of the RDR
by Danielle Levy on Apr 14, 2014 at 10:15
A study by Pershing reveals that wealthy clients understand the outcomes of the RDR but view advice as more expensive since the regulation was introduced.
Pershing has provided an insight into the impact the retail distribution review has had on the UK's wealthy population.
The study, carried out by consultancy Scorpio Partnership, found that one in eight of a 1,000-strong sample of wealthy individuals, are more likely to seek financial advice as a result of the RDR.
Charges, perceived value for money and preferred method for fees all featured in the wide-ranging study. Here we present the key findings.
RDR outcomes understood
Respondents largely understood the benefits of RDR, with the vast majority taking the view that the outcomes had the potential to improve interactions with financial services.
The removal of commissions proved the most widely understood aspect of the regulation, followed by clarity about the range of products and services an adviser can provide. Respondents also understood that they must now pay separately for advice, products and services.
RDR hasn't necessarily prompted clients to seek advice, but for those who already have an adviser or wealth manager - around 22% said they have considered switching to another firm.
Meanwhile, over 30% of the sample said advice had become more expensive since the onset of the RDR.
Since the onset of the regulation, the UK's wealthy say fees for products and services have become easier to understand and compare. While some say an advice gap is happening at the lower value end of the market, over 20% said access to good financial advice had improved.
Just under 30% also felt they now have a better understanding of the types of services offered by different providers.
Value for money
Wealth managers and advisers may also be relieved to hear that 75% of respondents believe they are receiving good value for money from their providers. Moreover, 77% said they had an understanding of how their financial provider is remunerated, a core outcome of the RDR.
Ad valorem doesn't find favour
Less than one fifth of the sample preferred ad valorem fees when it comes to paying for services. Fixed fees for each consultation proved the most popular option for 30% of respondents. The second choice was a transaction or project fee dependent on the task.
Range of opinions
At a headline level, ad valorem was not the top choice of the sample. However, preferences for charging methods differed among self-directed, advisory and discretionary or rather 'delegator' clients. Self-directed clients showed the strongest bias towards fixed fees for each consultation, while discretionary clients preferred ad valorem fees.
Under-45s most receptive to RDR
Scorpio Partnership, which carried out the research on behalf of Pershing, noted: 'Not only are the under-45s welcoming the changes, they are actively embracing them. They are significantly more likely to have made changes to their investment portfolio than the older generations.
'In fact, 40% have either extended or consolidated the range of products in their portfolio. More than that, one in three of the under 45-year-olds has consired changing provider as a result of RDR compared to one in six in the other groups.'