2plan response to the RDR Interim Report
Firstly, as reported by John Lappin in Money Marketing the report is "a triumph for IFAs and the FSA". Finally, it has been recognised that the only true advice is independent advice and how the banks have failed to get their way, although it should be noted that the IR is only part of the process and we need to continue to lobby, support the likes of AIFA - who must be given huge credit for the work they have done - as we now work towards implementing these revised proposals.
It is also very pleasing that the IR is much in alignment to our own response to the RDR Discussion Paper where we proposed amongst other things that;
- "Independence" means just that and we do not believe that the term Independent should be used by an adviser who is anything other than "whole of market"
- that the Primary Advice proposal should be dropped;
- Qualifications; that Chartered Status should be something to aspire to and indeed advisers who hold this status would then have a clear marketing advantage over others and a natural migration would occur due to market forces rather than market intervention. Those who do not have the necessary experience or qualification should only be able to deal with certain areas of advice if they had such a support service as our own 2plan technical, specialist team who is overseen by a Chartered Financial Planner and we then provide all the necessary research and recommendations.
- Remuneration- we agreed with the RDR proposal to introduce Consumer Agreed Remuneration however it should apply to all advisers across all distribution channels (including employed adviser businesses such as Banks and Building Societies). The IR points to the fact that the FSA wants to stop product providers playing any part in the determination of advisory remuneration and would remove the potential for provider-led remuneration.
The Interim Report
Many respondents and the FSA have called for a simpler landscape, in particular for a clear distinction between ‘advice' and ‘sales' and as the starting point a much simplified landscape consisting of three components; Advice, Sales and Money Guidance.
Advice
There would be only one type of adviser and all advisers would be independent, both in terms of status and in their practices, operating remuneration determined without product provider input and recommending products from across the whole market. They would also all meet appropriate minimum professional standards with the proposal that the CII's Diploma in Financial Planning be the qualification for "advice" rather than something higher.
Sales
The FSA's starting point for sales is services that are strictly non-advised. These would include distributors that are not independent so those likely to be affected include Openwork, Intrinsic, Barclays, Vision Network and Sesame and also multi-ties could be prohibited from using the advice label and would have to convert to a non-advised sales service and be labelled "sales people".
Money Guidance
This is a newly proposed information and guidance service based upon recommendations made by the Thoresen Review, to determine whether and how a national service might develop. Although the FSA will be co-leading the "Pathfinder" work, Money Guidance is not an FSA regulated activity and designed to stimulate more consumers to seek out regulated advice and sales services.
Obviously as an industry we are in changing times - nothing different in that you may say, as many of us have only seen change in the time we have been in financial services so we have learned to welcome this and adapt, especially when it promotes independence or assists our professionalism and the way we are perceived by the consumer. The Retail Distribution Review has brought many things into the spotlight and we will continue to communicate these proposals and how 2plan sits within the new regulatory framework. From the many topics raised it is very pleasing to see that the IFA is finally being recognised as the "advice" sector of the market as opposed to what is being proposed to call someone who offers non-advised sales (guided sales or execution-only) as a "salesperson".
As I have said before, I believe anyone would find it hard to argue that we all want our industry to be perceived as a more professional one and anything that assists this should be explored. For many, it is quite some years since exams have been taken and although I believe just striking up exams as notches as if you were collecting them is not the answer; the general public recognise qualifications as with barristers and accountants etc. Furthermore, there is a willingness I believe and an understanding in our industry that IFAs need to become less reliant on initial commissions and start to form (as many of you are already doing so) a more sustainable income stream and one which should not be incentivised by the product providers but one agreed separately with the client.
As members of 2plan we are working on ways we will assist you in obtaining higher qualifications over the coming years. This is nothing to be concerned about but should be welcomed and I can assure you all that we will provide support services to assist you and your businesses and ensure we all sit firmly in the independent sector of our industry.
Sustainable business models need to be built and we firmly believe these businesses should be regulated and not position themselves as some kind of non-regulated services company that does not offer complete services or stand behind the IFAs' advice but seeks to distance themselves should anything untoward occur. 2plan operates in a regulated environment and we provide all the necessary point of sale, back office and services you need to carry out your role as IFAs. We are committed to the independent, regulated sector and will continue to work with you to provide an efficient and profitable business model for you to operate with and in turn pass on these efficiencies to you and your businesses.
Together with the TCF initiative a new type of business model will emerge for the future and one which we have carefully planned and designed 2plan around. We are extremely well positioned in today's marketplace evidenced by the quality of IFAs joining 2plan and the differentiated services we are providing everyday now to you all, and services that we are developing further to enhance our offer to you over the coming years.