Retail Distribution Review

Written Evidence submitted by Nic Williams, Financial Adviser

My name is Nic Williams and I am a Financial Adviser in Knutsford, Cheshire, and below I have tried to outline my concerns about the proposed changes that the FSA want to implement through RDR.

Should these changes occur a significant number of small IFA firms that currently look after the financial requirements of the average man, or woman, will be unable to continue to trade.

The reason for this is those households that are on medium to low incomes will not be able to pay for the advice on a Fee basis as they will simply not be able to afford it.

This will lead to them only being able to access advice through a high street bank or other similar institution. This will mean that the consumer, in these circumstances, will not have the choice of product providers that is currently available through an IFA.

They will only have access to the products that the bank, or other similar institution is prepared to offer/provide. Therefore, the consumer will become disadvantaged and the relationship that has been fostered over the years between the IFA and the client will no longer be sustainable. This will result in the IFA, in these circumstances having to find alternative employment or become redundant with its consequential knock on effects.

Even though I am fortunate enough to live in Knutsford, and have an Office here, our clients, the majority ( approximately some 95% ) live and work in some of the poorest areas in the North West. They simply will not be able to afford to pay us a fee. If they were all very rich and lived in more affluent areas then perhaps they could and would, however, that is not the case.

The consequence will be that the vast majority of consumers that can currently have access to an IFA will no longer be able to do so and there will be a huge number of advisers no longer able to carry on, even though they are qualified, reputable and in the majority of instances never had a complaint made against them for an advice issue or anything else for that matter ! They are also individually authorised unlike some of the Banks which are regulated as a Block authorisation not by individual

I am 48 now, I have a good wife and a young family and I have been in the financial services industry all my working life. I feel that a lot of measures that have been put in place by previous regulators (as the FSA was only more recently created) have, on the whole, been for very good reasons and there is a culture now and it has been there for a long time now, of Professionalism, of Treating the Customer Fairly and giving good, sound advice to the consumer.

There have been numerous examples, for instance, of advising our clients to implement items, such as a will, where we have not received any form of financial reward for doing so. The advice has been given freely as it was felt to be necessary, this will cease to be there for many consumers in the future. In fact much of the advice is given freely as there is not always a need to alter what the client currently has, therefore no income would be generated. This is more prevalent at times such as now !

The Financial Services Act, was enacted in 1986, for very good reason. Its powers came into force in 1988, and the way in which they were implemented have gone a long way to ensure all those involved, life companies, pension providers, advisers, etc. behave responsibly and fairly. The introduction of compliance, supervision, examinations, etc have all worked well and can continue to be improved.

However, the fee based system which is proposed will result in a great number of consumers being disadvantaged and a consequential result will lead to a huge number of people currently employed by IFA’s becoming unemployed/redundant and a further burden to the state.

It is for these reasons, and I must stress, not just for my benefit, that I am trying to encourage your Committee to address these real concerns and to bring some pressure to bear to encourage people to think again before it becomes Unstoppable !

So to summarise/ reiterate the salient points they are as follows:-

1. If a Fee based system is adopted the majority of people seeking independent financial advice will not be able to get it as they will not be able to pay for it. The only winner here will be the Banks, Building Societies, and other similar institutions who will pick up these customers as I, and many more like me will no longer be able to carry on.

Even though, I live in Knutsford, my clients live throughout the most hard pressed parts of the North West and they need ongoing advice on a basis that they can afford, and for them that Is by us being paid by the Provider on a commission basis. There is no issue here of a lack of transparency as all monies, costs, etc are disclosed to the client prior to their acceptance of what is being advised/offered to them.

A great many of these clients we have looked after for many years and all that will be lost as a result of a Fee based system being introduced.

2. With regard to the level of qualification that an individual should require then surely, that should be tempered against what the individual will be advising upon and to whom. i.e. A junior GP does not have to become as qualified as a Professor of Surgery in Heart Surgery to remain as a GP and do a good, professional job for the patient/client. Nor should he/she need to.

The same goes for the Accountancy profession, and others such as the Legal profession, where there are different tiers of expertise/ knowledge that happily live side by side with one another.

With these professions they Refer types of work to one another, where they themselves do not handle that type of work/case.

Why is it that we in the Financial Services Industry cannot do the same! We already have, and have had for a long time Introducer Agreements in place between IFA’s where required. This enables consumers/ clients now to get the advice they need from a specialist in a particular field.

3. I like many others, find Mark Hoban’s stance and comments unhelpful. Those sorts of comments, like the FSA as well, are made by people who do not have any concept of the reality of the situation.

I just do hope that for once, common sense prevails before this scenario goes so far that it cannot be stopped as a result of an individual’s or an organisation’s posture/position.

The consumer is the key, and the overwhelming majority cannot afford to pay for advice from their own pocket. In addition, there are good robust systems already in place to protect them if they were to be poorly advised.

The cost alone to implement and put in place these proposals seems unnecessary, particularly at a time when we are all well aware that day to day life is very challenging just to make ends meet!

If something is not broken why is there a need to fix it?

I fully support the position that you are taking and I do hope that you continue to pursue this matter vigorously.

Please help us all in the Industry that have brought our concerns of this issue to light.

Should you wish to contact me then please do not hesitate in doing so, even if it is just to clarify a point.

November 2010