Retail Distribution Review

Written evidence submitted by Guy Dawe

I am an Independent Financial Advisor working in Bristol with clients around the country but concentrated in South Wales. I advise mainly on workplace pension schemes and have worked hard to bring down the savings shortfall in respect of pensions that this country faces.

Qualifications

I have no particular concerns as regards the qualifications required to give independent advice and fully support the concept of a more professional body of advisers nationally as long as all advisers are treated equally in this regard.

Transparency

My greatest concern given that most of my clients earn less than £25,000 per annum is the concept of paying fees for advice. Most of my clients do not currently pay for any advice as they have very little experience of dealing with fee charging professionals like accountants and solicitors and indeed these professions are deemed to be avoided as much as possible because they cannot be afforded.

I am not concerned about the transparency of the cost of advice which I already have to make explicit and my client’s have very rarely baulked at the amount I am paid for my advice.

I am very concerned that most of my client’s will not be able to afford to pay the fees and this will damage the relationship I have as my clients currently know they can approach me at any time for advice or clarification and will not be charged for a telephone call or response to an email. RDR in its current form will drive a wedge between clients and IFAs and make poorer clients more reluctant to contact me. The commission I have earned from my wealthier client’s has subsidised the cost of advice to my poorer clients where I have earned very little or in respect of stakeholder pension schemes I earn nothing at all. Like most IFAs I earn 80% of my income from 20% of my clients. RDR will mean the 80% will likely be abandoned as it may not be cost effective to give them advice.

The RDR will in my view undoubtedly mean that working class clients will be largely abandoned by the IFA community and sent into the clutches of the banks for financial advice. As banks currently attract the vast bulk of complaints compared to the amount of advice they give at present I find it hard to understand how this can be the best outcome individually or even desirous at a national level either socially or economically. The other result I foresee is a reduction in competition in the market place as many especially smaller independent adviser firms and individuals will retire, close down or change status. This is a very unfortunate as it will reduce choice in the market and reduce competition.

Type of advice

I am very concerned that the clear difference between independent advisers and tied agents at present will be blurred and that most clients will not fully understand or appreciate the differences.

Suggested Changes to RDR

I would like to see initial commission phased out over a period of time say 5-10 years especially for smaller premium business of less than say £250 per month or £50,000 single premiums and for smaller firms (I do not count my own firm as a smaller firm) but for ongoing commission (either level or fund based renewal commission) to be kept as an option to paying regular fees.

The current clear distinction of independent and tied advice to be retained in its current form.

December 2010