29th November 2010

The Ethical Partnership - The Retail Distribution Review (RDR) - my thoughts

The Treasury Select Committee has called for written evidence about the changes to the regulation of independent financial advisers.

In particular, they are keen to receive evidence about how the Retail Distribution Review (RDR) will achieve three main outcomes:

1. a transparent and fairer charging system
2. a better qualification framework for advisers
3. greater clarity around the type of advice being offered

Personally I feel that adviser charging will deliver on the first outcome. The obvious focus of the client paying for advice rather than a product provider will ensure greater clarity.

I am also fairly confident that the third outcome will be achieved under RDR, although I worry that the public will suffer due to a contracting number of advisers being available post 2013. This could be remedied however by addressing the second outcome.

RDR has not addressed this outcome properly or fairly. Yes, qualifications are obviously an important element if our profession is to deliver quality advice to the public but it is not the only ingredient. Certainly for new entrants into our industry it will be essential but I am convinced less so for experienced advisers.

The FSA has recently commented that it is comfortable with 20% of Advisers dropping out of the industry by 2013. Why? Are they suggesting that that 20% is probably offering poor advice? Or are they inferring that there is a glut of available advice at the moment? Certainly a drop of 20% will make it harder for the public to access financial advice. I accept that IF the 20% dropping out is the "dregs of our industry" then it will not be a bad thing. However, I am not convinced that that is the case.

Why do I say that? Well, I am one of those "out of favour" financial advisers that has yet to meet RDR qualification levels. Why have I left it so late? Am I thick? Perhaps I am just lazy? After all anyone worth their salt has known for years that RDR was coming. In which case if you haven't bothered doing something about it earlier it is an example of your ineptitude. Well I guess I am guilty then! Go to jail, do not pass Go, do not collect �£200, and stay there!

Certainly I am no Einstein. My academic achievements are not exactly great. An HND in Land Survey, five O'levels, numerous CSE's (which those old enough will know mean very little), FPC 1,2,3, and F20. Thats it!

So, if I want to be part of a true profession post 2012 why don't I just get on with passing the exams and achieving appropriate 'gap-fill' (how crazy is that?!) to enable me to continue doing what I have been doing for the past thirty two years. I have tried.
I've taken two exams in the last three years but failed both! I could give many excuses like: I have over 225 clients to look after; manage two admin staff; have Director responsibilities including looking after our TCF policy, compliance procedures, and many other tasks that I wont bore you with, and then on top of that I have to find time to study. Certainly my revision time has left a lot to be desired and clearly the key for me is to invest more time into understanding exam technique. The thought of having to allocate more hours into an already crowded week to revise fills me with dismay and dare I say it...anger. I will try over the next year because the alternative is to be forced into early retirement but I am asking why am I being forced to do this at my age of a few months short of my 58th birthday? Am I really not good enough to give financial advice?

Certainly over the 32 years of being in the financial services industry I have on many occasions, especially in the early years, given advice that with hindsight could've been different. But that probably could be said about most advisers - the benefit of hindsight. Certainly experience has taught me what not to do and I would be right in claiming that today the quality of my advice is so much better than say ten years ago - and before you think it - my advice was, in my opinion, pretty good then.

I haven't suffered in recent times from client complaints. In fact I've only ever had one back in 1997 when I transferred a client out of an Equitable Life with-profit pension fund and the client was unhappy that I put part of his pension into a Japan fund that fell more than he would accept. The complaint was upheld because I had written to him stating my dismay that he was aggrieved and that with hindsight going into Japan was arguably not a good move, so the complaint was upheld because I should not have contacted him at all - so hard when you have a client who is unhappy. I've learnt that lesson now of course although thankfully I have not had to worry about a complaint since.

That, I hope, suggests my clients are happy with me. I do hope that that is right. Certainly that is my ultimate objective. So, does this mean I am one of the 20% that the FSA is happy to discard? Well it seems that that is the case. I feel I do a good job. I also deliver to that element of the public that will arguably find it hard to find advice from 2013. That can't be right. My clients deserve continuity. They need me because I know them very well. I understand them, their financial needs, and their financial objectives.

One answer of course is for me to get the right qualifications. Take the exams that I know I will pass perhaps? I don't advise on mortgages but I suspect I could pass that one surely? I haven't gone down that route of selecting easier exams because I wanted to take more relevant exams to my areas of expertise. Maybe not having the required exams means I don't have the expertise?! I believe that that sentiment is wrong. Certainly, as already expressed, so many of the questions in the exams were really not relevant to the majority of the work I do. Where I identify a lack of knowledge I of course refer the situation to someone who knows the answers, as any sensible person would.

By the way. Am I the only one that thinks some of the questions I have to answer are just not relevant to what I do? Who actually puts these exams together? Do they really know what we do? Some of the questions just give me the impression that they sit in their ivory towers.....

So, I ask the FSA this. Do you really want to see the back of me, and Advisers like me? Do you really believe that you are treating your customers fairly by insisting that Advisers, mature in years, must jump over more fences to carry on doing what they have been doing for many years? Do you really believe that our experience does not matter? Do you really want to see my clients left out in the wilderness? Will another "qualified" adviser have the time, or even inclination, to take them on?

I question the validity of this "moving of the goal posts". Yes, by all means offer advisers the chance to obtain better qualifications. Certainly for new entrants it is essential. It gives the public access to arguably better financial advice but don't deny clients ongoing service from their existing Adviser (unless it can be proved that that advisor is incompetent). They (clients) will be the ones that suffer.

Jeremy Newbegin
Director
www.the-ethical-partnership.co.uk

The Ethical Partnership Ltd is regulated by the FSA. The FSA does not regulate all forms of products and services we provide.

Registered Address: 180 Woodlands Road, Southampton. SO407GL. Registered in England No. 4281444

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