In Focus: 10 years of RDRJan 25 2023

'Horrible time' and 'best thing': Advisers share their experiences with the RDR

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'Horrible time' and 'best thing': Advisers share their experiences with the RDR

ByCarmen Reichman

The Retail Distribution Review has changed the advice industry profoundly, causing vast numbers to exit or lose their jobs, while others saw it as an inspiration and opportunity to forge a career in this industry.

While many advisers would agree the industry has become more professional as a result of the RDR, there is also consensus about things that went wrong, such as the advice gap. Some believe the impending consumer duty is designed to finish the job.

Below, three advisers share their experiences with the RDR, the way it has changed their careers, and the opportunities it has opened up for them.

David Robinson, director at Wildcat Law

'It was a horrible time seeing a very successful model forced to close' (credit: Carmen Reichman)

At the time of the RDR Robinson worked with building society partnerships at Aviva. He says he proposed a plan for keeping the work alive but ultimately that was rejected, to the detriment of the clients.

A wave of redundancies followed, propelling Robinson into another advice position dealing with an entirely different clientele.

But the experience has also shaped his outlook on life and what it means to run a successful business.

RDR was career-defining for me. I was part of the leadership team for Aviva looking after partnerships with building societies.

Our advisers worked out of often very small local building society branches. The model was never especially profitable for the building societies but it often enabled them to keep local branches open.

I drafted one of the option papers regarding RDR only to see it rejected in favour of shutting the arm. It was a horrible time seeing a very successful model forced to close, especially as the average client was never going to be able to benefit from post-RDR advice.

Instead, they fell into the advice gap as they could not afford to pay for advice fees upfront.

Removal of implicit charges for most of the industry and hence commission payments was the classic example of taking a sledgehammer to crack a nut.

It has not prevented advice scandals and mis-selling but it did prevent many poorer savers accessing financial advice as they cannot afford up front fees.

(Credit: Carmen Reichman)

It also contributed, in some way, to the closure of bank and building society branches up and down the country as customers would visit the branches to see their financial adviser.

We have seen what might have been through the incredible success of St James's Place.

My career is completely different to what it would have been if RDR had not happened. I was on a high pressure, fast-track career in financial services.

Dealing with the redundancies caused me to take a year out of the industry before joining Coutts, dealing with completely different clients.

Thanks to a large redundancy payment I was able to spend a year with my then baby son. This completely changed my outlook on work and family life, which has ultimately led me to setting up my own business that also allows others a better work/home life balance.

Wes Wilkes, managing partner and investment director at Iron Market Group

'The best thing that happened to me, my family and my clients' (credit: Carmen Reichman)

Wes Wilkes says the RDR cost him his bank adviser job, but nevertheless he regards it as the best thing that could have happened to him.

He was on a trip to Lapland when his colleagues informed him his then employer, Santander bank, had called for a telephone briefing and told its advisers to stop any client meetings until further notice.

Being forced to ponder his future, he ultimately decided he wanted to try going it alone, as an RDR-compliant adviser, delivering investment advice the way he thought it should be delivered.

Iron Market Group, a directly authorised firm with DFM permissions, is now in its tenth year, and has some ambitious growth plans for the future.

I was made redundant from a large bank as a result of RDR. It forced my hand to follow in my father's footsteps and finally start my own business (he passed away a year later) and see what I could make of it.

I became directly authorised within a year and obtained discretionary management permissions within three years to become what I see as a true wealth manager.

I've always been really heavily into technology, I firmly believe that technology can make humans better and more efficient.

I'd seen lots of good little bits of tech [in banking] but on the whole the technology we used to have to deal with as financial advisers in banks was really poor and quite old and laboured and what I wanted to do if I was to launch a financial advice proposition on my own was start with that in mind.

One of the big things that I wanted and was able to do was having an app and an online portal where you get complete transparency, not just of what I might be advising on but that also had an aggregation tool that they could see their complete financial picture in one place.

From a client experience perspective that's the point I wanted to start at and work back from.

This means a client can click through on a few lines and see every transaction that's ever happened on their account, so fees, costs, charges, trades. I think the more transparent you can create things the more empowered people feel.

We are trying to have an impact beyond managing wealth. Shared knowledge is one of our values; connection, generosity, just having a deeper connection with clients that isn't necessarily always related to managing their wealth.

One of the great things that banks did do is the loyalty reward side of things, so if you had a current account you also got a discount on [other things]. That's what stuck with me, I thought it was always a really good thing to do, it adds more value to your client, they become part of something (we call our clients members of our 'Net-worth Ntwrk').

But equally we can add value to their businesses and their lives and their financial wellbeing through other measures and other services that we add (such as commercial insurance or talent management). And we're looking to build on that as time goes on.

We are 10-years-old next year, now with a group of companies with former colleagues in the business, and as clients. It's the best thing that ever happened to me, my family and, I'd like to think, my clients.

Dan Haylett, head of growth and financial life planner at TFP Financial Planning

'RDR spurred me on to be where I am today' (credit: Carmen Reichman)

Haylett says RDR spurred him on to quit his job in asset management distribution and become a financial planner some five years ago.

This was because the reforms had allowed professional modern advice businesses to flourish, and ones the he saw as having passion and a purpose.

He had searched for 18 months for a firm with the right mindset until he was lucky to be able to join TFP.

But he notes the RDR, though being a success overall, has not achieved all the things it had set out to achieve, and says the consumer duty could be able to finish the job.

I saw the good, the bad and the ugly of the financial advisory space as it went through the change and how people kind of just dismissed it or did not get it.

I saw that it spurred me on to be where I am today, because I thought well, actually, there is a much better way of doing this. And the really good part of the RDR is allowing a much more professional fee for service-orientated business models, which I think is the best thing to do, you know, the best way to deliver this.

I saw lots of amazing financial planners that were doing this work that really did not have the time of day because they were getting overtaken by all the asset gatherers. And that kind of went away a little bit.

So I was working in that environment, saw the impact of what it was meant to do. I don't think the RDR really achieved what it should have done. I do think consumer duty is probably going to achieve what RDR was meant to have achieved, potentially. I think it will focus more on professional services, on the human being.

I've done huge amounts of work on human behaviour and I've worked with a company called Shaping Wealth, which is all about the human being and their behaviours around money and life and how that's impacting them.

(Credit: Carmen Reichman)

I think consumer duty is focusing [on this], and there is specific wording in a lot of the pieces around consumer duty about behaviours and emotions and the human being, which has been neglected somewhat.

RDR got the minimum qualifications up, it kind of weeded out a lot of expensive asset management models. And it created a level of professionalism.

But I do think the consumer duty is the thing that then takes that to the next level, because I do believe this 'my relationship was with your money, because that's how I get paid' idea, that isn't going to cut it going forward.

I'm not saying you don't charge on assets. I don't agree with it but I'm not saying you don't do it. But I do think that you will be much more challenged around how you're dealing with and demonstrating that you completely understand the human being sitting in front of you.

And the ongoing service that you provide and the advice that you give is not aligned to their money, it's aligned to them what they want to do.

We're in a privileged position, we are therapists, we're pastoral care, we're marriage counsellors. We have conversations with people and couples that they've never had themselves. To just focus on their assets is wrong and is doing a complete disservice to the position that we have.

And that's where I think the RDR kind of pointed that way, but never enough. I think the FCA has probably got into a position where they believe that there is enough legs to now kind of go again.

carmen.reichman@ft.com

'Horrible time' and 'best thing': Advisers share their experiences with the RDR

David Robinson, director at Wildcat Law

Wes Wilkes, managing partner and investment director at Iron Market Group

Dan Haylett, head of growth and financial life planner at TFP Financial Planning

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