The conjecture over the RDR now seems to have been replaced with the debate surrounding the independent and restricted labels that advisers now have to adopt.
This week’s adviser rant addressed this issue with the adviser stating that while he believes he gives “unbiased, independent advice without prejudice”, he is struggling to identify which category he falls into.
This story caused debate within FTAdviser’s readers, with Alan Lakey, partner at Highclere Financial Services, stating: “Whether the previous black and white system was perfect is arguable but at least the consumer understood the difference between independent and tied.
“The impact of depolarisation was to muddy the waters (supposedly in the name of competition and consumer enfranchisement) and the RDR simply added a ton of damp compost to an already cloudy mix.”
The FCA made it clear in its first RDR implementation review that advisers have to tell clients their exact proposition but the problem with this is the word ‘restricted’ does have negative connotations.
Advisers should tell clients what they advise on, what they will not look at and what they specialise in, but why do they have to tells client ‘I am a restricted adviser’? What does that mean to a client? To the man on the street, it sounds like a restricted adviser cannot help as much as an independent adviser.
What I think is much more important and which advisers should make clear to clients is whether they are regulated or unregulated. Clients don’t give a damn whether you are restricted or independent as long as you recommend the right products and give good advice.
What does make a difference to them is whether you are regulated or unregulated, as the latter can have severe ramifications on clients if it turns out the advice was actually not in their best interests.
Advisers are a profession
The RDR has been in place for almost one year now with the aim of making the industry more professional. Well this has obviously failed so far.
Earlier this week, I revealed that local authorities are resisting the introduction into new long-term care legislation of a requirement to refer self-funding individuals to regulated financial advisers and are wary of referring to advisers in general due to past mis-selling scandals.
Kay Ingram, divisional director of individual savings and investments at national firm LEBC Group, told FTAdviser her perception from an Association of British Insurers meeting was that local authorities “seemed wary” of referring those that need long-term care to financial advisers “due to mis-selling scandals of the past”.
A reader commented on the article asking why there was no mention of Society of Later Life Advisers. He wrote that these advisers go through a “comprehensive and demanding assessment process to become a member of this elite group”.
He said: “I despair at the uneducated state of the people who make these crass decisions without researching the market. Sounds like they are simply tarring everyone with the same brush. The desperately needed advice for this sector of the population will it seems fall to Charities with no experience of the various solutions. SOLLA advisors are real specialists in everything associated with long term care. For many this is all they do.”
If councils are wary of referring clients to financial advisers, surely this supports the argument that the care bill must ensure that authorities can only refer clients to regulated advisers, rather than any Tom, Dick and Harry. This will ensure the advice given is relevant and appropriate.
Back to fees
Also this week, FTAdviser sister publication Investment Adviser revealed investment advisers are likely to face a bill of close to £30m in the first quarter of 2014 after the FSCS announced a shortfall of £29.5m in the investment intermediary sub-sector.
The shortfall comes after the compensation scheme last month began compensating clients of Catalyst Investment Group, which sold more than £50m worth of bonds backed by the collapsed ARM Asset Backed Securities life settlements fund.
This raised angry comments from advisers who, quite rightly, are upset they are continually paying for other firms’ failures.
IFA David Barnett’s comment on the story said: “It does beg the question, why can’t the FCA do something about these companies before things go wrong. I thought that was the prime purpose of all these regulations.”
And he is completely right. There must be a better way than firms being hit with a massive bill that they cannot budget for; perhaps a monthly fee or perhaps those firms that sell unregulated or ‘high risk’ products should pay more. Answers on a postcard please.
Also this week the unbundled/bundled debate rages on. My colleague Michael Trudeau wrote an excellent blog on Standard Life fighting over criticisms levelled against it regarding its bundled-to-unbundled conversions as the firm continues its push to move over to an entirely clean fee model.
Last week FTAdviser revealed that many unbundled funds on Standard Life’s two platforms will be more expensive than their bundled counterparts, in some cases due to a temporary rebate the firm has negotiated ending by the end of January.
Standard Life have argued the impact of discounted options not being available on some funds is negligible and far lower than the tax that would have been paid on bundled funds. Would you agree?
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