‘Writing on the wall to be chartered’, Pruggmayer RDR plans

Julian Pruggmayer, IFA for West Midlands-based Financial Risk Management, admits that as much as it pains him, getting ready for the Retail Distribution Review has not been that much of a tribulation apart from the “Mickey Mouse” mistakes a trade body has made.

Mr Pruggmayer has been an IFA for 30 years and prior to that he was a police officer for eight years with the West Midlands police force. He admits that his firm, where he is the only one giving advice, is RDR-ready but he is still undecided what model he will go for - independent or restricted.

Move to fees

The Financial Services Authority has confirmed that, regardless of whether advisers opt to be independent or restricted, they will still receive legacy commission post-RDR. However, if advice is given on 2 January, that new advice will come with a fee.

Mr Pruggmayer believes that this is effectively breaching a contract.

“When a person takes out a pension, or life assurance policy or an investment he has a legally binding contract between him and the insurance company and then a legally binding contract, an agency agreement, between the introducer of that business and the insurance company.

“What the FSA is doing, I suspect as a direct result of EC intervention, is tearing up those legally binding documents because either they choose to or because they are directed to by Europe.

“You can’t change a contract and make it retrospective. That runs contrary to the entire principal of English contract law.”

Mr Pruggmayer, like all advisers, has had the move to fees conversations with his clients and, he said, they make it “very clear that they prefer to pay via commission”.

Qualifications

Mr Pruggmayer believes two things are needed to be a successful IFA - technical knowledge and service. To offer the former, advisers need to continually educate themselves.

“That is why I have a number of pension management institute qualifications to my name as well as CII qualifications. I am level four currently. But the writing is clearly on the wall for everyone to be chartered and I think the whole market will move this way”.

Surprisingly, Mr Pruggmayer does not think it is a good thing if the whole market becomes chartered.

“From a personal basis, it’s a good thing that you are able to demonstrate that you are prepared to go that bit further than the others when it comes to training but one has to say there is a certain level of knowledge that is required in this industry for the masses and I think RDR easily meets that requirement.

“The problem you have is that the more qualified you get, such as getting to chartered, you will need to look at higher net worth clients - you will have to do it to stay in business – but those sort of people already have access to experts i.e. the major firms of accountants and solicitors in the big cities. Will they want to be bothering with provincial IFAs who just have the words chartered after their name? I’m afraid sadly no they won’t, no matter how misconceived that might be.”