It would be fair to say that Chris Miller, proprietor of Bath-based Christopher Miller Financial Planning, is not an optimist regarding the effects of the Retail Distribution Review.
Indeed, Mr Miller, who is by his own admission not a fan of the regulator or the rule changes it pushed through, says his clients and the man on the street will not benefit from the regulatory overhaul and that advisers are slowly being wiped out.
He says the biggest hurdle to getting RDR-ready was completing the qualifications, which he describes as a “waste” of 600 hours of his life as he claims a lack of technical knowledge was not to blame for identified mis-selling and client risk failings.
“I wasted 600 hours of my life in study time just to prevent the FSA stealing my license to trade. With the time pressure on one’s working life, you cannot be going back two to three times to retake exams.
“That was the main problem to transitioning to the RDR and even legal opinion by sophisticated barristers opine that that process was probably illegal, because there’s nothing in the legislation that allows for the removal of a license just by failure to upgrade one’s knowledge level.”
“Critical client risk occurred by products that were poorly designed, in combination with market conditions.”
However, despite his lamentations Mr Miller says he the RDR has not resulted in his firm losing any clients, saying all were “very understanding” about the limitations studying for exams placed on his time.
He adds that despite many being “horrified” about the charging changes many have accepted the new remuneration model, which is based around a simple transposition to a percentage of assets invested structure.
“The issue of commission never was an issue between me and my clients. Every element of commission was discussed early in the discussion process. It wasn’t, ‘oh by the way I am going to be paid by such and such’.
“So that has always been extremely transparent and never an issue so when this method was removed from them they were pretty horrified.”
Practical concerns
Mr Miller decided to remain independent post-RDR world as a “shopfront” for the firm as it is a “clear concept” for clients to understand, although he admits that it does involve more “complexity” for advisers under the new guidelines.
“This muddying the waters with restricted advice is just a bridge too far for me. I have kept it as an independent practice as I want to offer anyone any product that may potentially be needed to cover off their potential requirements.”
Mr Miller says he limits the complexity of having to be comprehensively whole of market by discounting products based on the needs of his client base, which he describes as “the man on the street and Middle England”. For the majority he discounts esoteric investments such as venture capital trusts, enterprise investment schemes and unregulated collectives.
“If I can match the client to an esoteric product I am happy to go down that route but one can discount them in a workman like way, as the FCA says, for those clients who simply don’t fit that profile.”
Like most in the industry, Mr Miller says he has had issues with providers in the post-RDR market. In one case, FundsNetwork paid out an undisclosed amount to him after he complained that he had suffered financially due to a spate of errors created by the firm’s content management system.
“I think the providers have been put through the meat grinder in preparation for the RDR. As I understand it the cost of preparation for the RDR was estimated by the FSA in their smoke-filled rooms in Canary Towers to be £600m, but now the cost so far has been £1.7bn. Those are the figures that are being bandied around.
“It’s the providers that have had huge amounts of input to their IT systems and the changes that they needed to make in their back offices that have absolutely ramped up the cost and that will be passed to the clients, to the people that use their products, so how can that be good for clients?”
Critical client risk occurred by products that were poorly designed, in combination with market conditionsMas is ‘beyond comprehension’
One common ‘unintended consequence’ from the RDR is that the man on the street will no longer be able to access advice, a contention with which Mr Miller wholeheartedly agrees.
The service that ostensibly fills this gap to some degree is the Money Advice Service, though Mr Miller is contemptuous of the role this can play.
“Now there’s the Money Advice Service which the FCA seems to feel might take up some of the slack, but we all know that Mas is a joke. Now they are talking with the banks in an attempt to send the man on the street there for simplified advice, which will probably mean more mis-selling and sending people to banks is a bit like sending a sheep to a pack of wolves.”
Mr Miller is also critical of the FCA’s micro-management of the IFA sector, and blaming this for the cliff-drop in the number of advisers.
“I am convinced there will be a further significant erosion of our numbers because many IFAs who are practicing who are older than 55, are at the point of saying enough is enough and a heart attack is simply not worth it.
“I’m sure this sort of drip drip of losses of our colleagues will continue, so I feel that the marketplace is going to be problematic for the middle England client who will simply lose their adviser as they cannot afford to service them.
“I mean essentially the RDR is overcomplicating matters, overcomplicating investment matters and administration matters.”
