Retail Distribution Review

Written evidence submitted by Kenneth Gordon, Independent Financial Adviser

1) I am an IFA, self-employed and for compliance and regulation purposes, am authorised under Positive Solutions, the National IFA.

I am 63 years old and have been an IFA since 1989, a total of 21 years.

Prior to that, i worked with different Life Companies since 1968, making a total of 42 years working in Financial Services.

I specialise in Retirement Planning, Investment, and Inheritance Tax Planning and also advise on Protection plans and Savings Plans.

I have , therefore, a considerable amount of experience in Financial Services and at this stage in my career, probably as confident as i will ever be in what i do.

2) I have studied for and sat examinations consistently through my career and passed the Financial Planning Certificate in 1996.

Since then i have regularly sought to increase my learning and knowledge of what i advise on, through mainly Continued Professional Development, attending seminars and courses and reading relevant material in journals, magazines and periodicals.

I have also, under Positive Solutions, been subject to fairly rigorous training and development including the requirement to obtain licensing to advise in certain specialist areas such as Pension Drawdown and Inter-regime pension transfers.

I have always strived to keep abreast of the ever-changing regulatory and compliance regimes so that i can continue to provide advice and service my clients in a professional manner.

3) I enjoy what i do and , health permitting, i would intend to continue advising and servicing my clients until age 70. My clients are pleased that i intend to continue and many of these clients, who i have had for a considerable number of years, would prefer not to lose me as their IFA, especially those who , crucially are approaching retirement as many of them are and also the ever increasing number who do not buy an annuity at retirement and are in need of continuing advice well into their 70’s.

I do not have any help in running my business apart from some part time p.a. work and i find myself regularly doing work on behalf of clients in the evening and at weekends.

It is becoming increasingly difficult to devote the desired time to seeing clients because of the regulator choking the very life out of this business.

4) Because of the FSA and RDR, i am now faced with the situation that on 31 December 2012, i am fully qualified to run my business but on 1 January 2013, i am not .

Realistically, i would have to retire, which i do not wish to do, and hand over my clients to ( probably ), a young, fresh-faced IFA, armed with his diploma but with very limited life experience of Financial Services, or continue giving restricted advice to my clients, which to me is not an option.

I know of no other profession where this exists and i believe what the FSA are doing is open to legal challenge.

As i have already indicated earlier on in this memo, i am not averse to advancing my knowledge of my business and , in fact, i am constantly doing just that. However, to be told that all my lifetime of experience counts for nothing and to be dumped unceremoniously out of the industry i have spent my life in, is frankly, insulting.

5) I would therefore like to bring this incredible situation to your attention.

As Positive Solutions have around 1500 IFA businesses under their wing, it is relatively easy to gauge common feelings concerning key matters in the industry through the message board which is facilitated and available to all partners.

Significantly, there is almost unanimous support for "Grandfathering" not only from those IFA’s most affected by this regulation, but also from the younger IFA fraternity who see no logic to the FSA ruling.

In my opinion, this is a knee-jerk reaction by the FSA and a "face-saver" for them after their well aired failures in the banking sector and they this is indeed as badly thought out, poorly researched and misinformed piece of regulation as i have seen in my lifetime in Financial Services as is most of the RDR.

6) My plea to you is therefore to support a case for debate that Grandfathering be introduced to the RDR legislation. The parameters for how this would work would of course, have to be examined carefully. The most obvious cut-off points would, in my opinion, be ( say ) the number of years as an IFA and the age of the IFA - the obvious level being 20 years and age 60.

There can be little cause for concern about disciplinary records/fraud at these levels as it would be highly unlikely that an IFA would have survived that long under the stifling burden of regulation and compliance that now exist in our industry.

There would , of course, be anomalies, as there is with any set boundaries, but with the right level of informed debate, there is no reason why this cannot be concluded to most people’s satisfaction.

Informed debate has been singularly lacking with regard to the whole of the RDR legislation, and it is only by individual submissions to MP’s and the interest now being taken by cross-party MP’s and the Treasury Select Committee which is welcomed by the IFA sector, that informed debate has now arisen.

This is because bodies, such as AIFA who were supposed to represent our sector, mainly failed to do so.

At the very least, there should never exist such a severe " disengagement" of the sector, and there could be an allowance which was workable where experienced advisers could not take on new clients but continue to advise their existing clients.

7) May i also ask you to address the ( unintended ), causes and effects of this badly thought out legislation. I believe the FSA have stated that between 15-20% of IFA’s will depart from the business and this is "acceptable". Firstly, i would question where they derived these figures from and secondly, even if that were accurate, the 15-20% lost to the industry are the "top-end" , in other words, the most experienced advisers who should not be lost.

May i also suggest that these figures are fundamentally flawed.

Through Positive Solutions, i have many colleagues in the industry, including 5 who are over 60 and with a combined 150 years in Financial Services.

Everyone of them has now taken retirement and i know that in every case, the compulsory diploma and hundreds of hours of study thrust on them at their advanced age, was a significant factor in their decision.

Equally, i have been able to take on some of their clients but am now unable to take on any more as it would prejudice the servicing of my existing client bank.

If you accept these above circumstances are being replicated throughout the industry, and i have no doubt that this is the case, then it follows that the 2 main causes and effects of this are :-

a) A large number representing the most experienced IFA’s in the country will have left the industry by the end of 2012.

b) There will be a frighteningly large number of "orphan" clients left with no access to advice.

8) Lastly, may i say that with all good intention, i enrolled with IFS for the Level 4 Diploma.

Having read briefly through the course books, my professional estimate is that around 80% of the learning materials are not needed on a daily basis with regard to my ongoing running of my business and much of this knowledge would be obtained as and when it was required within my duties of servicing my clients.

The suggested number of hours study required is approximately 350 which spread over the suggested 9 months equates to almost 40 hours per month.

In the midst of a recession and with some of the widest economic cutbacks in history, it is extremely tough to run a successful financial services business and make profit especially when the burden of compliance and regulation is taking up a disproportionately large part of your day and finding an extra 40 hours per month is frankly, quite impossible, especially when, ironically, one is inheriting more clients than can be dealt with, due to so many advisers getting out the business.

I am perhaps stating the obvious when i say that the timing of all this FSA regulation in the midst of a world recession and when the "savings gap" is ever widening, could not be more inappropriate.

January 2011