Don’t let ‘free’ myth return: Annuity Direct’s RDR plans
Regulated firms need to be clear to their clients about what they can offer over and above a non-regulated commission-based alternative.
Alan Higham, chairman of Annuity Direct, helped rebuild the company with the Retail Distribution Review in mind four years ago. As such, companies rushing to meet the new requirements with such little time to go don’t garner a huge amount of his sympathy.
But what about common gripes with the RDR, such as the move to commission making advisers’ lives much harder as clients could balk at the costs?
Although given the option of going with either fees or commission, most of Mr Higham’s clients prefer the commission route. However, he says this doesn’t mean there will be a lot of awkward conversations in store for him post-RDR, as he believes what is today labelled ‘commission’ will be easily renamed ‘fees’ after the regulatory change.
“I expect the vast majority of our clients will choose to have their fees paid out of the pension pot, which is now called a commission but after RDR is called an adviser fee.
The mainstream press is writing about commissions ending this year, but they don’t. How many consumers are aware of the RDR and what it means?
“The customers have got enough to think about without us banging on about rules that have very little impact on how we do business with them.
“We don’t think the way we do business with our customers is going to change after RDR. All our advisers are qualified or will reach qualification by deadline. The business was rebuilt in 2008 with the aim of having all our advisers properly qualified by the time the RDR came in and we have achieved that goal.”
“What the FSA wanted advisers to do, they have been extremely clear about for quite a considerable amount of time.”
A going concern
What does worry Mr Higham about the RDR, though, is what other people are going to do and the impact that will have on consumers.
One specific worry is that the distinction between regulated and non-regulated services is not being properly communicated to the general population.
“I have yet to see a journalist in the consumer press explain that the RDR only applies if you give regulated advice.
“The mainstream press is writing about commissions ending this year, but commissions don’t end. How many consumers are aware of the RDR and what it means?
“If I take professional responsibility in recommending to you what product you should buy, that is subject to the RDR. But if I give you advice about your options for retirement for example and show you what is available on the market, you will have chosen the product.
“When I’m promoting my service, I can promote that service as being ‘free’ because I will still get a commission.”
Not only could people market a non-advised service as free, but Mr Higham points out that there is no minimum qualification required for giving non-regulated advice. In theory, someone could provide details of products and offer to complete all the paperwork if the customer decides to purchase one without actually making a recommendation.