The Retail Distribution Review
by Alexander Beard, on Nov 21, 2012 9:31:28 AM
As we head inexorably towards January 1st, a new year with a ‘brave new world’ for retail financial services, most managers and business owners like myself, have been working flat out to make the changes to their business necessary to cope with the enormous practical and philosophical alteration to the way we do business, otherwise known as the Retail Distribution Review (or RDR as it is being more colloquially referred to in the press)
For those of you blissfully unaware of what is happening, from January 1st commission on investment products is being outlawed!!
The regulator has taken this decision because it believes (erroneously in my opinion) that commission creates ”product bias”. In 35 years I have seen little evidence of this because of no adviser worth his salt is going to recommend a pension to somebody who hasn’t got net relevant earnings or to make an ISA contribution where a pension contribution may be more beneficial from a tax point of view. The various tax wrappers that we employ such as Pensions, ISAs and Bonds all have their place in proper, individual, personal financial planning and again when the level of commission offered on these products is broadly similar it is difficult to imagine an adviser recommending one of these tax wrappers over another for commission purposes. It simply does not hold any water!
However, the regulator has been moving in this direction for some considerable period of time firstly with the advent of commission disclosure, then the necessity for us to offer fees to our clients to retain our independent status and now this. It came as no surprise to me and indeed I had been predicting it for some time. We as a business have spent thousands of man-hours over the last six months preparing and we believe we are as far forward as any other advisery business in the country and are ready to take on the challenges that face us.
The other significant aspect of RDR is the fact that all advisers, whatever their experience, have to reach a new level of qualifications by December 31st or they are no longer allowed to practice. I can think of no other profession where the baby of experience is thrown out with the examination bath water! I apologise for that appalling tautology but this makes me quite angry. Every one of my clients who I have spoken to are horrified that the regulator should discount experience over a simple academic qualification. Whilst academic qualifications are important and I support the FSA’s drive to raise standards and believe these standards will become increasingly important, to tell an adviser with 35 years’ experience that they need to sit 4 or 5 exams in order to continue advising the clients who they have looked after (in my case some of them over 30 years) is clearly nonsensical and given that among my clients are many top professionals, Accountants, Barristers, Judges, Doctors, Surgeons and some very successful business men from pretty much every walk of life not one of them that I have talked to about this ( so far) can understand why the regulator would take this decision. It seems the regulator would rather have them looked after by somebody with all the necessary qualifications but no experience; again I can think of no other professional walk of life where this would be tolerated.
However it is what it is; we are now working hard to ensure that all our advisers are properly qualified by the end of December. It has been a difficult, tiring and immensely stressful period but after 25 years running the Alexander Beard Group I am not about to give up and walk away. Unfortunately, some of my experienced and most excellent contemporaries have decided to do just that and the loss will be to the industry and to the advice given to the public.
However, ABG is blessed with a group of hard-working, committed individuals who will all be determined to ensure we move into this new era with a positive and robust attitude!