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If I had a penny for every article I have written containing that abbreviation, ‘RDR’, I will probably be well on my way to raking together a small fortune.  In fact I could probably recite the RDR story far better than the latest episode of CSI or my favourite childhood fairytale.

Don’t get me wrong, I would never dare imply that the financial services is so perfect an industry that it does not warrant some change, it’s just the way things have been done which has the RDR resembling a very bad dream which I think a few IFAs would rather like to wake from.

News that the full feedback statement has been postponed from its planned October date has just delayed the bad dream even further.  And forgive me if I don’t quite buy the excuse that the delay has been made to allow Jon Pain, who joined the FSA as managing director of retail markets, some time to get his feet under the desk. Should he not have been familiar with the process before being anointed with the new title?  If the FSA preaches the doctrine of treating customers fairly, how about starting with advisers as a whole instead of limiting ‘fair treatment’ only to the latest FSA recruit. 

The RDR is a massive endeavour and with most projects of its enormity - as Noah himself will testify from his time building the ark - requires continuity, a dedicated team and sticking to the deadlines.  Those are the basics, yet the RDR has seen its chief architect Sir Callum McCarthy retiring, Clive Briault, managing director of retail business getting the boot, director level responsibility for the RDR passed from Stephen Bland to Dan Waters and the recent announcement that Amanda Bowe is stepping down from her role as head of the review by October this year.

Does this sound like a ship with no captain that has decided to lower the anchor in a desperate attempt to buy some time and train up one? Then again given the plethora of unanswered questions and loopholes raised with regards to the RDR (read protection and mortgages) who could blame them for jumping ark, I mean ship.

While many have welcomed the RDR interim report’s proposed sales/advice split, it still boggles my mind a bit. Many fingers have been pointed to others who feel the same way, they are usually accused that the reason for their doubts is because “they just don’t want to be called salesmen.” Well, can you really blame them? Let’s be honest the title ‘salesman’ conjures up the image of a sweaty man in cheap suit carrying a briefcase, just reeling to sell you some form of burdensome junk.
 If I just want to ‘buy’ a product, does that necessarily mean I don’t want advice on it? I mean imagine walking into Currys and asking to buy a PC or some other electronic device. While you may know what you want, you’re not completely clued up with all the ins and outs of the product, so you ask the shop assistant for some help, who then answers you: “Sorry sir, I can’t give you any advice, I only sell products.” And your only alternative is to fork out a high fee to someone else, let’s call him the ‘shop adviser’ who will then give you some advice.

Of course you could always then opt for the chap called the ‘shop guide’. This person will indulge in a nice long a chat with you, giving you ‘guidance’ on what the product does, but will not help you choose a specific product, be it a PC or a pension, and they will definitely not, sell you one either. Helpful? Well, if you, like most people living in the 21st century know what a PC or a pension does, but after all that rigmarole are still left unsure about which specific pension or PC to choose, it could very reasonably be considered as a waste of time. Time is money after all.

On second thoughts it’s probably a good thing I am not getting any monetary credits for typing out that tainted 3-letter abbreviation. Who is going to advise/sell/guide me on what to do with the money?

I think the person who dreamed-up RDR has realised he needs to string this one out so as to have a job. Just another couple of years and we will have come full circle from the mid nineties.

RDR, TCF it’s just another job for the boys.

Simple solution.

Make every adviser independent.

Make every contract 100% allocation plus an AMC.

The fee can be front end or otherwise a bid-offer spread then it’s down to fund returns and charges.

Request a comparison to be held on file and disclosed to the Client.

That wasn’t too painful was it.

The obvious solution is just shut all IFA and direct sales companies down now. Many of us will be going out of business anyway after implementation of the RDR. The consumer can then purchase products on the internet with no advice and run the risk of getting it totally wrong. Not many of my clients are prepared to pay fees for advice and they are totally satisfied with the commission system. My clients receive free advice throughout the year. Should a fee be charged they will be forced to sit in ignorance as most of them are not in a position to pay. Or of course, refer to the FSAs ‘Money made clear’ on the internet. This is paid for through fees levied from IFAs etc!
The FSA just appears to be ‘job creating’ within it’s ivory towers and forcing the industry to obey their ridiculous schemes.

I totally agree with Steve August 14 comment, if the client understood all of this waffle, he/she had better explain to the FSA.

Some time ago the baby was thrown out with the bathwater. And now an arm has been thrust into the pipework to recover the bits and pieces. Remember the Six Million Dollar Man? (”Who he?” I hear so many ask) Well, they said they could rebuild him. “Cost you just $6,000,000, guv’nor.” That was 1970s television for you. Steve Austin was his name. In financial advice terms his name was the Man (or Woman) From the Pru/Pearl/Co-Op/Refuge, you name them. Practically long-term friends of the family selling and servicing Industrial Assurance policies (then Ordinary Assurance ones to those who had bank accounts and most did not) collecting premiums once every week and then once every four weeks.

The “salesman” is now an unpalatable concept (why is it never “saleswoman”?)in the financial services arena and Maike Currie is quite right to hurl the PC analogy into the ring. Twenty years ago the analogy was buying shoes, so not much has changed apart from the message’s new clothes.

Back to Mr $6M Man. They did rebuild him and he came back to the fray faster, tougher, stronger and super-human (not really more intelligent though).

Financial advice is not about being super-human just human. To support it means recognizing that nothing moves and nobody makes any money without something being sold. That’s what economies are based upon. From the earliest traces of buying and selling, import-export, trading - there’s never been any deviation. In consideration of X pounds Sterling, US dollars, Japanese yen, you get the goodies you want. So it used to be with financial products only they were never known as such, just straightforward policies that funded the funeral of mum and dad and yourself, gave you a tax-free lump sum at age 16, 18, 21, 65 - you get the picture. Now it’s just “burdensome junk”.

Unfortunately Maike is right. It is considered burdensome junk because the savings habit and the impact of knowing that the state will not provide has faded away, slipped into the past and the past is foreign country as L P Hartley wrote in the opening of The Go-Between (I think).

The Go-Between brings us back to the baby from the bath-water, reassembled in an unrecognizable way. Whoever we are, we do business with people we trust and how can we trust someone in the financial services environment who acts in a completely different way to the salesperson we meet when buying, say, table and chairs, food and drink, or a PC. Life assurance was never sold business-to-person, only person-to-person because they are invisible, the policy-holder acquires a promise, not a physical object.

The only way financial products can be delivered to the people who need them - and that’s those who have to work for a living - is for the imperative of financial provision to be delivered to them at school. So perhaps everything will be fine in another ten or twenty years. In the meantime, anyone for PC?

If you want a sentence that encapsulates the whole farrago how about:

“Remember that after all they are Civil Servants”

The term Civil Servant is the biggest oxymoron in the English language. They are neither civil (not necessarily the FSA, but engage with HMRC if you want an example) nor are they servile

MiFID is a European Union law which provides a harmonised regulatory regime for investment services across the 30 member states of the European Economic Area. MiFID is not volunatry. Under European law, a Directive has to be transposed into national law! The UK Financial Services Authority has proposed via their Retail Distribution Review (RDR) that in order for a UK Independent Financial Adviser to retain his “independent” status he or she would be obliged to sit and pass a number of new examinations. This standard could not be applied to an EU adviser passported into the UK and operating in direct competition with a UK adviser.

The FSA is now stuck between a rock and a hard place. RDR was a pre Northern Rock stitch/handover of the IFA distribution to the banking sector. It was Harold Macmillan who said what he feared most in politics - his response was: Events dear boy! …Events! Well “events” got in the way of this handover and the FSA were caught asleep on their watch and the FSA love affair with banks was instead shown as an adulterous liaison where unwise assumptions were made of their partner.

Further, I do not believe any consultation took place with the EU in order to ensure that RDR acts in harmony with MiFID. The recent FSA U turns has nothing to do with the FSA seeing the light of day and everything to do with the EC forcing compliance upon the FSA! Now the FSA are left with RDR egg on their FSA face . I believe the UK Financial Services Authority proposals contained within their Retail Distribution Review would in fact breach MiFID and would “gold-plate” EU requirements and be detrimental to a ‘level playing field’ and as such would be illegal under EU law?

The number of IFAs who have ever studied MiFID or indeed the IMD can probably be counted on one hand - which is why there is such rubbish said about how it’ll block reform.

For starters, most business conducted by IFAs is not MiFID business - save for collective investments. Any form of bond, WoL, PPs, SHPs, GPPs, insured drawdown contracts, 3rd way annuities etc etc are all IMD business rather than MiFID ‘financial instruments’. Ditto for pure protection. Refer to Annex 1, Section C of the Council Directive 2004/39/EC.

Secondly, the FSA is already getting away with gold-plating MiFID by imposing its ’single suitability regime’ (a mixture of both MiFID and IMD) on all retail business via COBS regardless of whether its actually MiFID or IMD business.

Thirdly, in terms of the competency requirements for MiFID business itself, all MiFID contains is a high-level “member states shall require investment firms…to employ personnel with the skills, knowledge and expertise necessary” [Article 5(1)(d) of the implemting Directive 2006/73/EC]. The detail is left to the member states. This is why in the UK we have the whole approved-person/controlled function regime, the T&C sourcebook (’TC’) and requirement for ‘appropriate qualification’. It’s not super-equivalent and neither will making IFAs be sufficiently qualified instead of relying on FPC and ’sales skills’.

In my mind the most striking thing about the RDR is that while the FSA run-around like headless chickens and the old life salesmen bang their tin-cups on the pavement demanding commission, lots and lots of good IFAs have simply pressed on with the trend we’ve seen in the last 10 years by studying-hard and moving their business models a long way from commision-driven sales.