Moving on From RDR

Last year was a seminal year for the UK financial services industry. The implementation of the Retail Distribution Review (“affectionately” known as RDR), not unnaturally led to a huge amount of soul searching in the industry, particularly among advisers.

Quite apart from the challenge of adjusting to a commission-free world, we were all preoccupied with (among others) issues such as the cost of servicing lower-value clients, “clean” share classes and fixed or percentage ongoing fees.

A year on though I would respectfully submit that it is time to move on. A Twitter “conversation” last week with Chris Budd of Ovation Finance reminded me that there are far more important matters affecting people’s finances. The adviser community risks appearing irrelevant or worse still uncaring if it doesn’t give voice to these concerns.

I had this point rammed home in the autumn when we initiated two client communications in the autumn of 2013. The first informed our clients about the change to clean share fund classes. Having spent some time composing the email letter I was almost disappointed to find that NOT ONE client was concerned enough to get in touch! The second was a client satisfaction survey. When asked in the survey to prioritise their top five reasons for using our firm, investment and advice costs came a distant third behind the main reasons for buying our services. I suspect that other advisers would find that their clients had similar priorities.

There is a danger I think that especially when “chatting” on social media sites, advisers appear to be “navel-gazing” and out of touch with the everyday concerns of ordinary folk. We may have different reasons for using sites such as twitter and one may be to chat with our peers. However, it cannot help an industry that has long complained of being ignored/sidelined to then engage in discussions which appear irrelevant to Jo Public!.

So what are the “big issues the industry should focus on this year. Everyone will have their own opinions but here are a couple to start with, one of which is already generating a lot of heat. Some advisers have taken a commendable lead in focusing on the scandal of annuities. All advisers should give voice to this topical issue, in the process widening discussion away from focusing only on the need for independent advice.

Another major issue, that got Chris and I talking last week, is the potential problems caused by the Funding Loan Scheme and it’s possible distorting effect on the housing market. Whatever your views on the merits or otherwise of FLS, it’s impact is certainly important to a far wider audience than just advisers. It is one we should be contributing to: in a big way!

I do acknowledge the sterling efforts of some advisory firms that are already publicising these issues. There are other important topics too, and some will hit us from “left field” this year which none of us can forsee. Providing a timely and coherent response to these issues and their effect on the public will (possibly slowly) begin to remind the government, regulators and the public alike that we are genuinely capable of providing a signifanct contribution to the development of financial services in the UK.

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9 thoughts on “Moving on From RDR

  • In a sector so filled with jargon, acronyms and technicality, it is little surprise that we all frequently engage in navel gazing. You’re quite right thought that these things rarely matter to our clients. Or at least they do, but our clients expect us to stay on top of these hygiene factors and focus our outward facing energy on what really matters to them.

    I agree that annuities and funding for lending are two important issues. I would also add to that the demographic timebomb about to go off created by the baby boomer generation reaching retirement, an ageing population and a welfare state increasingly unable to afford to support its citizens to a high enough standard in later life.

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  • Thanks Martin. Excellent ideas for other outward-looking issues too. I certainly agree on the demographic time-bomb!

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  • Totally agree Peter. For me one of the biggest issues, which if resolved will bear much fruit for future generations, is tackling financial illiteracy.
    After years of jargon-filled obfuscation by a self-serving industry, it’s about time we all did our bit towards educating the country about basic money management. The best advisers do this with their clients as a matter of course, and PFEG are doing great work in getting this on the secondary and tertiary curriculum, but much more can be done.
    For advisers, balancing making a living and dealing with these issues is a constant tightrope walk, but it is worth making the effort, I believe.
    Twitter, AdviserLounge and other social networks are great places for us to compare notes – it’s how I heard about this article after all – but more than that they are powerful media for reaching the world.
    I could insert a blatant plug for MeaningfulMoney and Advisertech here, but I won’t 😉
    Great article Peter – nice work.

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  • Not sure about navel gazing or eating the dictionary but….

    Savers becoming accumulators and spenders now to be known as decumulators ?

    Outward facing energy ?

    Client focused * client centric* client facing ? What other way should a service industry operate ?

    There is only one issue worth focussing on and that is finding out what the public wants from us as an industry and supplying it in a manner that they think is worth paying for.

    Regulators and financial fads will come and go but the demand for relationships which add value to peoples financial arrangements will still be as high as it ever has been.

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  • I am reminded of “Have I Got News For You”, and the “Guess the missing word from this headline in ‘Plastics Extrusion Weekly'” section. We shouldn’t be surprised that ‘civilians’ couldn’t care less about the detail that exercises pages like this one. Advisers care because they act in the client’s interest and need to understand and debate this stuff, and potentially change rules, products etc to the public’s advantage. That’s what the client is (in part) paying you for – so they don’t have worry about it.

    As for jargon, it’s a trade language, we understand it (mostly) and therefore it serves its purpose within our narrow circle of financial services adherents; we translate it where necessary. However, my personal ‘beef’ is that rather too many of us delight in maintaining its obscurity. Investment Management seems to have a vested interest in perpetuating complexity. Its acolytes appear to believe that simplification cheapens their offering, and devalues their expertise – dumbing down = value down. Ego plays a part too, I’m sure, as for some their sense of self-worth is supported by being described as an ‘expert’.

    For me, the biggest advance would be for investment management businesses to recognise that ‘complex’ doesn’t have to mean ‘complicated’. Cars are complex machines, but don’t require us to have engineering doctorates to own and drive them. Likewise with financial services. Fund Groups especially need to address their “Tone of Voice” with client facing material, and to provide advisers with supporting collateral designed to make investing easy, to make the client feel valued, and to give them peace of mind. As Martin implies, clients probably have more important things to be getting on with – that’s why they should leave it to advisers.

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  • Many thanks to Peter and Phil for their constructive and valuable comments..

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  • I couldnt agree more, Peter
    The big issues as far as I can see are
    1. Recognising and dealing with the “extra” generation. Those people who are at conventional retirement age, who dont want to or cant afford to retire. Most of my clients seem to be in this bracket, and nobody seems to want to recognise the existence of this group of people. Government/regulatory policies and financial products seem to be designed around the old fashioned concept of retirement (ok, so civil servants still retire like that, maybe that’s why!)
    2. Helping smaller employers deal with the silly complexity of auto-enrolment. Auto enrolment is an ok idea, but the stupid regulations have made it complex beyond belief. Steve Bee’s proverbial chip shop won’t have a clue what to do and the language of auto-enrolment will be enough to make a lot of small businesses fail or refuse to comply.

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  • Thanks for your comments Philip and some good ideas there for more topics! Yes, AE worries me and I like the “extra generation” tag too. Some ground there for sensible input into debate in these two areas…

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