Retail Distribution Review

Written evidence submitted by D Chaundy

According to Hector Sants the Retail Distribution Review (RDR) had three specific outcomes (objectives):

· A transparent and fairer charging system

· A better qualification framework for advisers

· Greater clarity around the type of advice being offered

I will consider these in order:

A Transparent Charging System

1. At present retail investment products often include charges for 'commission'. It is already a requirement that the amount of commission be disclosed in specific monetary terms at point of sale. The RDR would do nothing to make charges for independent advice more transparent.

A Fairer Charging System

2. The term 'Fairer' is an overly simplistic and emotional term upon which to base the massive cost and damage which the RDR will inflict upon the Independent Financial Advice sector.

3. To whom is the RDR being 'fairer'? Is it to the High Net worth wealthy client who can easily afford to pay £200+ per hour for advice?

4. Or is it to the self employed plumber, with a wife and three children who is in desperate need of good advice to protect his family, but who will never be willing to pay £200+ per hour to benefit from truly independent advice?

5. Or is it fairer to the 65 year old Labourer who has acquired several small pots of pension savings totalling £20,000 and wishes to ensure that he gets the very best pension income possible, but who will never be in a position to pay the fees which will be demanded post-RDR?

6. Or is it to the general economy which is intended to benefit? The RDR will decimate the independent sales process for protection, which has historically been a bedrock of personal planning, and the volume savings market, which massively supports the economy.

7. Post RDR fairness will be limited to those with the ability to pay. The rest will be forced into the open arms of Banks or Insurance Companies. Organisations with a despicable history of abuse and misselling and a complaints record of astonishing proportions when compared to the IFA sector.

8. No reasonable person would describe that as fair!

A better qualification framework for advisers.

9. Few would refute the sense in any individual being adequately qualified for the work he does. Whether the RDR produces a better framework is disputable.

10. Financial advisers are an extremely broad church. Ranging from the product toting, here today, gone tomorrow, bank employee, paid a meagre salary and driven by a target culture. To Trust Specialists, Taxation experts, Investment Advisers, Pensions Specialists, Protection Salespeople, Mortgage Brokers and more.

11. A simple tradesman on an average wage needs advice. But he doesn't need any of the above. He needs to obtain the best possible product for his needs at the lowest possible market price from a reputable and sound provider. He also needs to be advised upon whether or not that product should be under Trust and what this entails. For this level of advice a Level 4 Qualification is irrelevant.

12. In particular however the intention to remove some of the industries longest serving, most reliable and trustworthy individuals from being able to continue to provide services to their long established clients is pure unadulterated folly. Never before in the history of ANY profession or trade has there been introduced a requirement that individuals must achieve a specific qualification be a specific date in order to continue to trade.

13. Electricians have the 'Part P' rules. But these rules do not prevent individuals with lesser qualifications from undertaking electrical work. They merely require that the work be 'signed off' by a Part P registered person. Why should experienced Independent Advisers not be able to continue to work with clients subject to a signing off of work before execution of a transaction?

Greater clarity around the type of advice being offered

14. I assume this refers to 'independent advice' vs 'others'. Clarity cannot be improved by muddying the waters! A return to a simple 2 tier system where an adviser is either Independent or Tied is abundantly clear.

EXECUTIVE SUMMARY

The RDR will achieve none of its stated aims and will in fact achieve much of the opposite.

November 2010