The financial services industry is full of jargon: TCF, ISA, SIPP, - you name it; we have the acronym for it.
Perhaps the most topical at the moment though is RDR or to give it the full description, Retail Distribution Review. This is no surprise and certainly hasn't crept up from nowhere, but despite this, the FSA have been lobbied hard this week to delay the implementation of the RDR.
In essence the RDR is designed to improve professionalism within the industry via a series of changes to the way the financial services sector operates. In our field this affects all financial adviser and wealth management firms.
Some of the headline changes revolve around minimum qualification requirements for financial advisers, with greater focus on being deemed to be Independent rather than Restricted and changes to the way that financial advisers are remunerated. Needless to say the RDR covers many more angles than just these, but these are the key areas causing most concern to financial advisers as a group. In fact rather than embrace these changes as a positive move to improve standards in the industry, many firms have sat on their laurels for the past couple of years.
Instead of taking exams to reach the required qualification level, they have sat back in the hope that the rules will be relaxed and some loophole can be exploited.
Instead of working out a sustainable proposition for clients, they have waited to see if the rules would be changed to allow them to keep pocketing big up front commissions in return for offering no ongoing service and hefty exit penalties for clients wishing to surrender their plans in the early years.
Instead of improving their product and investment knowledge, they have waited in the hope that the rules will change and become less onerous.
In summary, many firms have waited until it is too late, because they deem the additional work needed to meet the forthcoming RDR requirements too much effort. This is why we fully support the current target date of 1st January 2013 for the RDR to come into force and we feel that any delay in this date is a victory for those who don't seek improvement in our industry and who don't endorse professionalism.
As a firm we have been prepared for the RDR for quite some time. All our advisers meet the qualification requirements and in fact some are well ahead of the minimum requirements, by having attained Chartered Financial Planner status. We believe we have a strong proposition for clients whereby we align the firm's interests with those of our clients and we welcome an improvement in skills across the industry.
For those clients who are already being looked after by firms ready for RDR, they can only draw comfort from this fact. However, we fear for those clients whose advisers are still stumbling in the dark looking for a shortcut or postponement. These advisers may not be providing poor advice, but they are clearly going to struggle in the new world of RDR and from the evidence of a recent industry seminar that we attended, the general feeling was that many clients would be sacked by their existing advisers who deem them unprofitable. This may be the unintended consequence of RDR. This concerns us hugely, as we feel that all clients deserve access to high quality, RDR friendly advice and that their only option should not be 'restricted' advice provided by the banks.
If you are concerned about how the RDR may affect you and your advisor or if you feel that you may not be receiving the service that you should be, please contact me at jon.telford@msfs.co.uk.
Tags: Retail Distribution Review, RDR, Chartered