Perhaps unsurprisingly, therefore, the firm was ready and fully compliant by the end of last year with the new rules coming under the Retail Distribution Review. However, Mr Dodd suggests these rule changes continue to pose a challenge because the RDR regime is an “ever-moving canvas”.
“We were as ready as anybody could be, but to say completely ready? I don’t think anyone could be. There is stuff coming out even to this day about RDR that we didn’t know about and I imagine the regulator did not know the implications either, so was anybody ready? The regulator wasn’t ready.”
Mr Dodd did not have any qualification issues to deal with - the major bone of contention for many - as he was already diploma qualified and is one step away from achieving chartered status.
“I’ve carried on taking examinations and am about to sit the final qualification exam for chartered status, so I am going to carry on and even when I’ve got chartered I will still carry on.”
When asked whether he enjoyed it, Mr Dodd replies: “I wouldn’t put it as strongly as that! But I think it’s good for all of us to revisit our qualifications and keep them as up to date as possible – it can’t do us any harm.”
Unintended consequences
Unintended consequences is now a well-mooted term in the post-RDR market and Mr Dodd believes more things are being uncovered “which no-one really envisaged”.
As an example, he flags up the evolving relationship between HM Revenue and Customs and the Financial Conduct Authority and how the former interprets the rules. Issues such as taxation of on platform rebates and adviser charges have seen the revenue get into quite a muddle.
“This is clearly something that has caused issues. There are certain areas of advice that are now intensely complicated because of how HMRC has interpreted the regulations.”
Mr Dodd cites the example of investment bonds, which he claims are “probably dead in the water now because of the taxation of adviser fees and income withdrawal payments being made from investment bonds”.
“That was never intended I’m sure but no doubt, this issue has been caused by the RDR.”
Another RDR consequence, albeit not one that could be termed ‘unintended’, is that due to the move to qualifications the industry lost advisers who were not willing to sit exams. Prior to the RDR, MIA had two advisers as well as Mr Dodd, but one of these left due to the RDR.
“The other adviser has given up his permissions to act as an adviser. It was very much about qualifications and his age. He had previously passed exams on two occasions to reach the benchmark required and didn’t want to go through it again.
“That said, he has remained in the industry as a paraplanner/administrator. He doesn’t want to leave the industry as he loves and enjoys the industry very much, but he wasn’t prepared to go through taking qualifications in his late 60s.”
Despite this paraplanning connection, Mr Dodd is cautious on another RDR consequence predicted by many that there will be a boom in the use of paraplanners post-RDR, as he argues that they are too expensive for the majority of advisers.
“They are obviously providing a very valuable service to IFAs but if a paraplanner costs almost as much, if not as much as an adviser, advisers need to consider if this is financially viable.”
The fee issue for a lot of advisers is in their heads rather than client resistance; it is about how you have that conversation with people.Do clients value advice?
Continued consternation over the RDR exists in relation to the move to fees. For Mr Dodd, this has not proved a problem; the firm moved to a fee-charging basis five years ago and he says it has not encountered any issues from clients.
“The fee issue for a lot of advisers is in their heads rather than client resistance; it is about how you have that conversation with people. If people don’t want to pay a fee, they clearly don’t value the advice they are getting and I would suggest that anybody who doesn’t value the advice that you are giving shouldn’t really be in your client bank.
“We spoke to clients about the RDR and they reacted largely positively in that they understand that we should be paid for the work that we do and I can only say that there wasn’t any significant resistance, provided that we explained it correctly to people in a way that they could understand.”
Mr Dodd is of the view that ongoing advice is “absolutely critical” and represents the key value-add for clients.
“Our industry and our profession as we should now call it has long given pseudo advice, but it’s been very front-end based and you could hardly call that advice really. An initial fee for a lot of work done in the beginning is fair, but the critical success to any financial plan is ongoing advice. Without that, it isn’t a plan.”
Like the majority of the industry, Mr Dodd chose to remain independent, highlighting that that is the way the firm has always operated and that it resonates with clients.
“We wouldn’t want to stray from that unless we absolutely have to. The term restricted is not attractive and it has either been very poorly chosen or very well chosen, whichever side of the fence you sit on but it’s not a term we like the sound of at all.”
Providers have more work than us
Mr Dodd agrees with the view of many advisers that providers continue to have teething problems in the post-RDR world, but he says there are mitigating factors, not least being that he says they had more to deal with than advisers in adapting to the new world.
“I think they have a bigger issue to deal with as their businesses are much bigger and more complex and I think they’ve had a lot more work to do than the advisory community.
“I think some have been able to adapt better than others and probably all of them have still got teething problems that will continue.”
