Positive Solutions warns of charging model timescale

adviser charging is not paying a fee

The RDR is not about charging a fee as is often implied.It is entirely about clarity and about the adviser and client agreeing the price of advice. I have seen nothing in the RDR that prevents an IFA from continuing with their existing business model and receiving their remuneration from the financial product that they recommend to their client if that is what they want to do. However no longer will the product provider be influencing the cost of that advice. At long last pricing control will be where it should be between the client and the adviser. That said business change can take quite some time to implement and the forward thinking IFA is already working on that change. I am more optimistic than Jim and reckon two to three years is a reasonablt time frame to implement that change

Posted by: Nick Bamford

Managing Director

The FSA need to re-examine the timing and indeed the whole concept of their proposal. The country is in recession and they expect clients to find fees for advice when in the past they could choose the commission route. The cost of £430 million and £40 million per annum should consign this ridiculous document to the bin. Stakeholder failed as have 20 years of regulation but carry on regardless. Countless thousands of people have lost their careers in this industry along with future plans due to regulation but without much coverage. After 200 years the Man from the Pru got it in the back but now we will have 'restricted advice'and 'money guidance' whilst IFA numbers will dwindle with no new blood coming into the industry. A certain Pink Press mouyhpiece has congratulated the FSA on "a job well done" in banning commission but his company take a 2% trail fee on investments which must be over £100,000! I'm sure all your clients were delighted to pay you that this year.Most commission arrangements allow for 1/2%.

Posted by: Peter Taylor

Reality check

It is very obvious from all of the comment here and elswhere on the charging issue that none of the people making the comments have actually really faced up to this challenge. Most seem to think that repackaging their incomes with the help of providers is enough but have never actually tried to persuade a client to pay the ludicrous up front payments they have been used to getting. 3% is often quoted as a norm but I have yet to see anyone persuade a client investing £100K that filling in a few forms at the beginning of a relationship can be worth £3000 of their money. It's easy when done with smoke and mirrors but rather more difficult done with a staight bat.Take away the factoring and this is likely to be the crunch element of any RDR.

Posted by: phil melville

Director

So we have waited for the news of the RDR and what do we get. A revamped version of Polarisation with the addition of Fees. I would love to know how the FSA intend to inform the general public of their intentions and not simply leave it to the IFA because if they dont they will be responsible for yet again turning a large industry into one that will simply dwindle away. Or is this what they want. Unless I have read it incorrectly, the consultation paper informs us that if a client cannot pay for the advice from own funds they can go and get credit!!!! Yes lets get more people into debt, well done FSA.

Posted by: John Scott

Chartered Financial Planner

As always there is a bigger picture associated with comments like this from a chief exec. PS along with a number of networks (note the Sesame/ Bankhall merger)will be staring down the barrel of financial oblivion after the RDR is implemented. At the back end of last year PS had only 70 advisers qualified to Level 4 out of 1700+. They have just 3 years to get 96% of their advisers qualified to level 4 or risk losing them. Presumably they have factored in a 25/30/40% fallout rate post RDR? This is irrespective of those who just don't want to get qualified and will see this as the perfect opportunity to exit the industry. Hence PS pushing their academy and trying desperately to get as many of their partners through as possible. They know for a lot of their partners the timescale might be a bit tight and hence we will hear more of this bleating about their not being enough time to make the change, in order to get qualified or alter the business model. This time the complaint is about advisers changing their business models, PS will know the exact figures for how much investment business is written as bonds on full commission terms and must be woried to death about the loss of this income in the short term as advisers try to get to grips with a fee based income structure as required by RDR. PS also has the additional burden of 'guaranteeing' to buy out partners at 4x renewal income if they elect to retire. Not only will they have worked out how much this is likely to cost assuming todays renewal income, but will they have factored in the huge increase in this income that will come as advisers who are going to exit the industry increase their renewals prior to an exit? Hmmmm! another guarantee being offered in this industry, like lots of others just how good a guarantee is this likely to be? Especially as buy out values in the market place as a whole will probably plummet for the average IFA. Will PS attract advisers looking to exit the industry because of this guarantee? It all begins to look a little bit uneconomic to me

Posted by: Phil Stevenson