RDR rules prompt firms to hive off financial advice

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An increasing number of accountancy firms are seeking to outsource their financial services, according to the chief executive of wealth management consultancy Capital Asset Management (CAM).

Since the introduction of Retail Distribution Review (RDR) on 1 January 2013, Alan Smith said his firm had seen a number of enquiries from small accountancy practices and that he predicts more will follow suit.

“The bigger firms will be okay, but I predict that for the smaller firms, the ones who do provide in-house financial advice will become increasingly rare,” Smith said.

“Without even trying, we've had three firms approach us to take on their financial services." 

"On a rules level, it’s difficult for firms to meet the regulatory expectations and offsetting accounting fees is another issue. so they are asking what other options are out there.”

“The financial services area is very complex. So coming to an arrangement with a trusted ally is the best way forward. From a client perspective, it’s carefully handled, so their end result is a positive one.”  

RDR, introduced by the FSA, outlawed the payment of commission to financial advisers on advice relating to investment pensions and annuities.”

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About Rachael Power

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27th Feb 2013 15:10

The Law of Unintended Consequences strikes again.  The theory behind the new rules was admirable: human nature often meant that advisors sold the products with the most commission.  However, under the new rules advice is becoming harder to find, or unaffordable.  So we are once again back in the position of a consumer faced with a plethors of products he does not understand, but no knowing where to turn for help.

Surely we can find a middle ground, without gold plating the rules as usual.

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01st Mar 2013 12:44

It is amazing what the wee man from the 'Pru' has created over the past 25 years.

From the simple Life policy to savings type endowment policy (which always seemed to give a reasonable return in the old days) What started in 80;s as a good idea to prevent  ripping off the ordinary working man with redundancy cheques to invest has escalated to be nearly as highlyregulated as the Nuclear Industry & resulted in returns for the ordinary working man declining rapidly as everyone takes  a cut  for regulation transfer of units & massive bonuses for doing (or not doing in some cases) they were paid to do in the first place




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01st Mar 2013 14:15

Overkill and where's the clarity

Although many advisers including bank sales people during the recent FSA mystery shop have claimed the service to 'be free' it is a fact that many firms (IFA, tied, de-polorarised or merely slightly tied round the edges) required cliens to actually sign the commission disclosure page of an illustration (not relevant to UTs) so clients did know. Does anyone really beleive i the tooth fairy; Sainsbury don't provide services for free etc etc.

The actual evidence for commission bias was nowhere near as strong as the FSA would have liked to have found but ploughed on regardless. A better course would have been to reinforce disclosure including a more rigorous approach to the weasel ways of salaried sales forces 'we don't get commmission'.

The Law of Unintended is quite rigth about the plethora of products and nowhere to turn. The new categorisation of Independent or Restricted is so blunt as to not be true. The FSA thmeselves make no further distinction. Restricted includes former IFAs who did not migrate to a wider product offering (typically inc ETFs and other non comm or more sophisticated products) now commonnly refered to as 'Restricted- whole of market'. The same FSA category though also inlcudes SJP (really restricted despite the glitzy words and with a pre-dermined level of client fees which will still be product paid - are they clairvoyant?) and others who only deal with a mimited number of product providers in any category they cover at all (the panel approach).

So my second point - to the FSA is where does this bring clarity? That objective was a central remit together with consumer confidence. I see little evidence for either.

Will the last adviser please turn out the lights; but you can't until you have paid the full and prospective costs of all FSCS and FOS settlements


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05th Mar 2013 13:03

RDR and Advice

The increase in regulatory costs has undoubtedly put pressure on the availability of advice, particularly for the mass-affluent and mass-market with the withdrawal of many Banks financial planning services.

What is also disappointing about RDR is that client costs look to be increasing with providers in the value chain, most notably fund management groups, looking to increase margin on the back of RDR. I suspect price pressures will apply over the coming months to address this.

It is worth pointing out that many advisory companies have been operating on a fully disclosed fee basis for a number of years - we have done so since 1998. Furthermore, commission will still be payable on a number of advised products such as protection/mortgages and for non-advised 'guided' sales such as annuities.

We are already seeing a growth in non-advised 'guided' web providers and while these can be useful for a number of people, they are not always equipped to provide the full suite of options to enable the best possible client outcome. For example, annuity comparison sites - but should the client be looking at an annuity in the first place??

The best alternative option for accountants not wishing to offer financial advice in-house is to partner with a number of advisory specialists. Accountants and Financial Advisory Specialists would do well to work in partnership and through collaboration deliver mutually beneficial opportunities and most importantly; quality client outcomes!

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