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Transition to RDR: Change doesn’t have to hurt

One of the most dreaded aspects of the Retail Distribution Review was the client conversation where the IFA must explain how not only has advice never been free, but from now on must be paid for through a fee, but, according to an adviser, this seems to be unfounded.

However, according to Lee Fisher, a director at Lancashire IFA Burton Fisher, clients have proved perfectly willing to make the transition.

Founded in 2006, Burton Fisher Financial Services is a general-practice IFA, covering mortgages, insurance, pensions and investments as well as some general insurance work.

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Transition to fees

While it was previously listed on Unbiased.co.uk as having a 20-80 per cent split between fees and commission, Mr Fisher told FTAdviser that has now swung all the way over to something more like 70-30, with much more emphasis on fee business.

“We do receive commission on general insurance life insurance and mortgages. It has been probably a three or four year process. We were working on it a lot of last year.”

However, despite this major shift to fee business, Mr Fisher says clients have been been universally accepting of the switch.

“We have been fine to be honest. It tends to be facilitated by the provider or on the wrap. We have certain clients that will write a cheque but the majority of clients want the fee to be taken from the product.”

In cases where the adviser charge is facilitated by the product provider, there is not a huge difference for the client between that and previous commission structures.

Challenges

While some advisers have found difficulty studying for exams, Mr Fisher found the most challenging aspect of the RDR was working out the company’s new service proposition.

“It has been the actual fine detail of the service proposition and how much the charges would be, and the ongoing service proposition.

“There are two service levels. Our bigger clients are on an annual review service where we charge up to 1 per cent per year of funds under management, reduced for larger funds, and it uses a wrap and rebalanced portfolio.”

This upper tier of service is for clients with at least £85,000.

“Below that it’s pretty transactional. We can offer a review service and it’s on a client by client basis.

“Two or three years ago we adopted wrap technology and integrated that into the business. In the meantime we have all been studying for exams and getting to level four which has been an uphill struggle but we got there.

“We have also been [Society of Later Life Advisers] accredited so we advise on long term care and equity release as well.

“So far it has been very good, not many problems so far. Everyone we have seen at review we have converted. It’s been quite positive. We don’t have a lot of legacy issues with clients who hadn’t had a review.”

Independence

While commentators and advisers debate the effectiveness of the new standards for independence, and bandy around unofficial terms such as “restricted whole of market”, Mr Fisher stands by the idea that true independence remains the best option for clients, despite more rigorous requirements.