We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

In association with

Home > Opinion > Tony Hazell

IFAs’ RDR misconceptions raise important questions

Just months away from the implementation of RDR, the IFA community is seemingly still harbouring worrying misconceptions.

By Tony Hazell | Published Jun 27, 2012 | Regulation | comments

The retail distribution review is just months away yet there still appears to be an astonishing amount of ignorance and misunderstanding. And I am not talking about consumers here.

It is sections of the IFA community that still seem to be harbouring worrying misconceptions.

I am not sure if this is down to lack of reading and research, entrenched attitudes or a lack of comprehension. But it is something that needs addressing.

One argument I see again and again is that RDR will not apply to banks or is in some way going soft on them.

In a reaction to one of my columns last month, one IFA suggested that banks would be able to operate hidden charges. The implication was that while IFAs would be forced to charge, banks’ advice would appear to be free.

Where do these misconceptions come from? Some banks may at one stage have fought tooth and nail to keep the status quo but they lost.

They are undergoing major upheavals in order to become RDR-compliant.

They, like IFAs, will be forced to be explicit about how they are charging for advice if they choose to give it – and this applies to both restricted and whole-of-market advice.

That is why we have seen Barclays go execution-only and HSBC scrap its tied advice service with the loss of 650 jobs.

HSBC felt it would not be able to charge a high enough fee to make tied advice work. This itself says something about the level of hidden charges consumers were paying but which will now be exposed.

Last week RBS said 600 jobs would go from its financial planning service – that is half ofthose the service employs.

RDR should create a more even playing field where fees and charges are transparent to the consumer.

This is why fund managers are producing RDR-compliant share classes.

Someone who goes into a bank branch seeking advice will have to be told what type of advice they are receiving and what that advice will cost.

How the charge structures are put together is still being decided. In fact the FSA says bigger firms including banks are more likely than smaller firms to be behind the curve in putting together their post-RDR proposition.

But do it they must. And investors will then know they are paying and will certainly not think they are getting a free lunch.

Like IFAs, banks do not know how their customers will react and most fear a fall in the numbers seeking advice.

Like IFAs, banks do not know how their customers will react and most fear a fall in the numbers seeking advice

But those who do pay are likely to become more engaged, asking more questions.

This is a revolution in financial advice – and, as with all revolutions, no one knows quite how the pieces will land once they have been thrown into the air.

Page 1 of 2


Our Columnists

Hal Austin

Hal is editor of Financial Adviser and has been for more than a decade. He has previously worked on a number of local and national publications.

Ashley Wassall

Ashley is editor of FTAdviser and writes on all areas of retail finance. Previously supplements editor at Money Management and editor of a European private equity publication.

John Kenchington

John is editor of Investment Adviser and has written about investments for several years. He has worked at titles including City AM and was recently named in the MHP 30 To Watch list of up-and-coming media names.

Jon Cudby

Jon is editor of Money Management and has 12 years' experience covering retail personal finance. In 2005, Jon was launch editor of FTAdviser and most recently he was head of online content for Incisive Media's financial services titles.

John Lappin

John is a weekly contributor to Investment Adviser with 15 years’ experience in financial journalism and 10 years writing on the IFA sector. He was formerly editor of an IFA trade magazine.

Most Popular
More on FTAdviser
FTA jobs