RDR delay: Qualified advisers on why they need extra year

Highly-qualified IFAs are calling on the FSA to heed MPs’ calls to delay the RDR for 12 months so they can adapt their businesses in time to swerve a potential mass market advice gap.

Last week the Treasury Select Committee (TSC) published a report recommending the rule changes be pushed back to 1 January 2014 so more advisers can meet the minimum qualifications requirements and continue servicing clients.

The delay was backed by AIFA, but the FSA, as well as the Chartered Insurance Institute (CII) and Institute of Financial Planning (IFP), immediately dismissed the idea, saying IFAs have had long enough to prepare for the impending exam deadlines.

Now IFAs who are already highly qualified and en route to completing any gap-fill requirements have told Professional Adviser they also need more time, as they try to re-engineer their businesses to avoid a wholesale dumping of less profitable clients.

Kate Brookes, IFA at Future Financial in Trowbridge, is already QCF Level 4 qualified with a Diploma for Financial Advisers (DipFA), but said the extra 12 months would help her continue serving the mass market.

“We are working on how to spend less time with less profitable clients but still offer them a service. We are coming up with a system where our proposition is split depending on need as I don’t see why I should give up on any of my client bank.”

Brookes’ planned format would start at a cheap entry level with a phone and email-based offering, before increasing in cost and complexity toward her firm’s full face-to-face advice service.

“But, for the cheaper service, we need a more complex and powerful back office system which reacts quickly to clients’ demands. An extra year to do this would really help.”

Consumers will not benefit from the RDR if it results “in a reduction in choice and competition through a substantial loss of advisers and firms”, the TSC report stated.

Sesame Bankhall Group estimates 12 more months could mean an extra 500,000 clients across the UK could continue to receive pensions and investment advice from its IFAs.

Ken Durkin, owner at IFA firm Mortgage and Life in Lancaster and holder of both a QCF Level 4 qualification and a doctorate, said despite several attempts, he has yet to come up with a workable alternative business model to commission.

“I still haven’t worked out how as a practice in a small country town I am going to be able to continue running without commission. I’m 64 and have started a few businesses, and essentially that’s what this is, starting a whole new business. Twelve months would give me more time to do that.”

Keith Jayne, IFA at Plymouth-based Westpoint, changed to a three-tier charging model some years ago and is already at Level 4, but supports a delay which would help his colleagues reach the new professionalism standard.

“Colleagues of mine, experienced people, who already have enough to do with the everyday tasks of being an IFA, would have more time to get their qualifications.”

The Treasury has been sent a copy of the TSC’s report and is expected to give a formal response after Parliament’s summer recess.