How I'm preparing for RDR: Ian Lowes

Ian Lowes tells Helen Morrissey about his company’s preparations for the RDR and voices his concerns about the shift to fees.

How are you preparing for the retail distribution review (RDR)?

We have always emphasised the ­importance of qualifications and ­education. In the past, we ­encouraged all our consultants to sit the College of Financial ­Planning exams. These days, we are ­encouraging them to head towards more advanced qualifications and gain chartered status.

We have always looked to remain one step ahead of what’s required of us and so we are more than ready to meet the standards set for RDR. If anything, we have been looking at getting re-qualified – that is, sitting exams to ensure that our knowledge in certain areas is being refreshed.

I have sat a lot of exams, but some of them were some time ago and I don’t think it does anyone any harm to go back and refresh their ­knowledge. For instance, I have decided to sit the RO1 exam on regulation and ethics as I feel it is important.

You seem to be well-prepared. How do you feel the ­advisory community as a whole is ­coping?

This is speculative, but I know there are people out there who are still hoping that RDR will just go away. As a result, we will see advisers looking to call it a day in 2012. But others have ­wholeheartedly embraced the RDR concept and were probably already aspiring towards attaining ­chartered status.

It is good that we should ­aspire to professional status and the industry has already evolved significantly over the last 20 years. It will be amazing to see how it will look in another 30 years. If you are serious about this ­profession, then you need to treat it as such and plan your approach.

Part of this is realising that you can’t know it all and we will see firms deciding to focus on certain areas going forward. For instance, we have focused primarily on investment. If you are going to do this, then you need to look at whether you have the necessary contacts to refer people on to should they come to you for advice on an area out side of your expertise.

What effect do you feel the RDR will have on the advisory ­community at a whole?

We haven’t overreacted to the RDR announcement as we didn’t have to do too much with regards to getting people qualified. I feel that we are lucky in that our ­business is big enough to be able to provide advice across several key areas while also ­remaining small enough to ­adapt to whatever changes may come our way. For instance, we already ran a fee-based operation a couple of years ago. We are very conscious of the reasons given for introducing fees, but we cannot help but feel it is like using a ­sledgehammer to crack a nut.

I feel it is the smaller clients who will really suffer as they may not be able to afford to pay fees – I don’t think that this issue has sunk in ­properly yet as it is effectively pushing ­advisers away from their clients.

This situation is made even worse by the fact that the direct sales forces of many of the life companies have been hammered and so clients can’t even get their advice there. They will end up ­being in the hands of banks which I don’t think is a good thing.

In our practice we rebate any commission that is in excess of 3% back to the client – it is only really a very small number of advisers who are doing the wrong thing yet we are all having to go through this massive change. Taking the commission option away would be a huge mistake.

How do you think this issue should be dealt with?

I think there is definitely an ­argument for making ­percentage charges. That way, you get ­something of a cross subsidy between the rich and poor.

Clients are comfortable with our charging structure. If we moved on to charging hourly fees, then we would make some profit but I do feel that cross subsidy would be lost.

Ian Lowes is managing director of Lowes Financial Services