Like many, Paolo Standerwick, director of Sutton-based MLP, was initially reluctant to embrace the Retail Distribution Review requirements. Indeed, he admits he waited until last year and eventually only gained his qualifications grudgingly as he did not want to leave the industry.
MLP has four advisers who are all level-4 qualified. Mr Standerwick admits that it was a challenge to achieve RDR compliance and that it was detrimental to his business, but he says clients themselves did not suffer.
He adds that while he feels “90 per cent” of the additional learning was “rubbish”, it has allowed him to augment his offering to clients by adding “asset allocation”, which he did not previously offer.
“It meant that I had to take time out and spend morning and evening studying for about three months but 90 per cent of it was rubbish.
“I had to do it or pack up giving advice, which I didn’t want to do. We all had to take time out to study, which was unpaid. Although it didn’t really affect our clients, it just meant that there was less time for prospecting, less time to do business and less time for leisure.”
“However, I will say that the positive side is that it has given me a new angle on developing our existing client base by now doing asset allocation. So that is positive but on the whole it was quite hard work.”
I recently asked my compliance guy if we can just charge on a percentage or if we have to offer an hourly fee and he couldn’t give me an answerDespite his more sanguine attitude to qualifications, Mr Standerwick does not want to go down the level-6 route unless he is forced to, as he doesn’t think it is necessary. “I think the bar is high enough now,” he explains.
On the remuneration changes, Mr Standerwick says this has had little effect as he has offered fees for some time and clients that previously paid through commission have not been deterred, but he laments that he is now unable to offer the choice and argues this is a real negative for clients.
“We were already operating in a similar way [to now] for quite a few years beforehand but we were flexible with how clients wanted to pay us.
“Paying fees hasn’t really deterred clients: we had a client in recently and she was happy to pay a fee, but I dislike that I cannot offer clients a choice now. There is no choice as they have to pay fees and a reduction in choice is bad for consumers.”
MLP currently offers clients an hourly rate, a percentage fee or a fixed fee, but Mr Standerwick says he would like further clarification from the Financial Conduct Authority as to whether it is acceptable to just charge a percentage.
“I recently asked my compliance guy if we can just charge on a percentage or if we have to offer an hourly fee and he couldn’t [give me an] answer. I think this will come out in a FCA report that is due out soon.”
Paolo says relax
Mr Standerwick is also expecting the FCA’s thematic review, due in June, to give further clarification on its independence stance and he says he is hopeful they will relax the demands for whole of market research.
MLP is an independent advice firm but Mr Standerwick says the firm may go down the restricted route if the independence bar is not lowered.
“A teething problem is understanding what the FSA means by a full independent financial adviser. The reason that we have stayed as an IFA is that I think it is too early to jump because I didn’t want to spoil anything as it [the business] is working.”
Mr Standerwick said his key concern was that if the FCA sticks to its guns on the stringently whole of market approach for an IFA, it will force firms to “scale the whole market place with every single client” and would face the prospect of further compensation claims in the future.
“You’re open to being ‘under the cosh’ for compensation. It sounds to me that if this relentless route of having to justify independence is constantly being pursued then we are quite likely to go down the restricted route.
“I don’t think anyone in the country is 100 per cent independent. But I am trying to keep all doors open at the moment to see how things go.”
Mr Standerwick is also keen to see the FCA ease its position in relation to post-RDR documentation requirements, estimating that the paperwork to set up a “basic” personal pension runs to a total of 120 pages.
Mr Standerwick said: “I think it’s possible if someone put their hat on [for there to be less paperwork] but it requires the FCA to relax a little.”
To reduce the burden, Mr Standerwick said MLP fills in most of the forms on behalf of clients once they have decided that they wish to proceed with a transaction and sends it to them in a pre-paid envelope.
“We highlight where they need to sign and those bits that need additional information. So it is a 90 per cent completed form when we send it to clients, as by that stage they have already agreed to go ahead.”
Low-value clients and Mas
There has been much commentary in the market about how low-value consumers can no longer afford financial advice in the post-RDR market, although some have said that they have never been able to afford it.
Although Mr Standerwick acknowledges that this is an unintended consequence of the RDR, he says that he wouldn’t be able to help people in this position in any case as he is running a business, “not a charity”.
“No firm is a charity. If you deal with the crème de la crème and make a lot of money why would you want to go downmarket and pick a market that doesn’t earn you anything? They should get advice but because of the way the system has gone they won’t get it.”
Despite this, Mr Standerwick is adamant that he would not send anyone to the Money Advice Service, believing it to be an utter waste of money.
“I wouldn’t recommend someone to the Money Advice Service as I had a client who came in here and he had a whole list of things that he got from the Mas about annuities and he said he didn’t understand any of it. It was wrong anyway as he didn’t need a joint annuity with his wife as she has an NHS pension.
“He didn’t need escalation or guarantees and he went to the website thinking he was going to get what he needed and he didn’t understand it at al,l but he printed it off and he brought it to our meeting.
“The Money Advice Service is a total waste of money and it’s our money and I don’t think they should be wasting it or competing against us either. They shouldn’t be calling themselves advice.”
