Retail Distribution Review

Written evidence submitted by Bharat Sisodia, Financial Planning Consultant

1. I would like to respectfully make the following submission to the Treasury Committee with regards to the Retail Distribution Review (RDR) discussion.

2. I am a Financial Planning Consultant working in the financial industry for the past 17 years. I am submitting my thoughts to assist the individuals responsible for reviewing the impending implications of RDR.

3. My submission is based purely on my own experience in the financial industry and feedback from my clients.

4. I believe it is always good to broaden one’s knowledge in one’s own profession in order to enhance the quality of service provided to clients. However, I do not consider necessary the high level of qualifications that are proposed in order to remain in this profession.

5. My objection is based on the evidence that I have received from my meetings with clients in order to provide them with sound advice and recommendations.

6. My client bank consists of people on low incomes (even unemployed and on benefits) to fairly rich business people. None of my clients have ever asked me to explain to them some of the technical issues that we are required to learn, for example, "sharp ratio", "narrow money", "broad money", "systems risk", "correlation", "standard deviation", "capital asset", "pricing model", "gearing ratio", etc.

7. All clients across my client bank are of sound mind with a basic understanding of the financial field. This leads me to question how the Financial Services Authority (FSA) have assumed that clients do not understand anything at all of the financial subject. Due to this false assumption on the part of the FSA, Financial Advisers have to write an extremely lengthy recommendations letter, consisting (sometimes) of more than 10 pages, to cover every aspect of their advice.

8. When asked, the majority of my clients have expressed that they would prefer to have a recommendations letter consisting of no more than 2 pages.

9. I firmly believe that health and wealth are the two most important issues facing individuals. Health care is taken care of by NHS, whilst wealth care is taken care of by an ever diminishing number of Financial Advisers. People need only basic advice and a financial review by an adviser who can point out in simple language the short falls in protection cover, retirement planning or their savings, so that they do not need to be taken care of by the State.

10. It is important to understand that the Financial Advisers are playing an important role in reducing burdens on the State, by helping individuals to remain sound in their financial state of affairs.

11. When asked regarding fee charging for advice, as proposed by RDR, most of my clients have expressed that they would not be willing to pay any such fees. A negligible number (from the high net worth clients) have said they would be happy to go along that route.

12. This obviously means that most of my clients will suffer as I will not be able to provide them with free advice. The consequences of this proposal will be devastating, long lasting and irreversible.

13. Due to the proposed requirement of achieving more advanced qualifications, many advisers have decided to leave the industry.

14. With the implication of fee charging structure, most of the clients will leave the Advisers, affecting the remuneration of Advisers and eventually making them redundant. Hence the RDR process will have been counterproductive. This will increase the list of unemployed people in the country.

15. Judging from the recorded number of complaints in the financial industry compared to ten years ago, I believe this industry is indeed in a good sound state of trust and responsibility. With this view in mind it is questionable why anyone would want to disturb the model that is working extremely well. Based on this I would urge you to "scrap" the RDR with immediate effect.

16. RDR will increase the cost of advice across the board. RDR will fall short of its objective of achieving good consumer outcome if not enough advisers remain in the industry.

17. I firmly believe that the RDR process has totally ignored the needs of the clients.

18. Judging from past experience, no matter how much people protest, whatever has been proposed is carried out. Hence it will be no surprise to me that the RDR will eventually come into force.

19. For this reason and in anticipation of the disastrous future, I have already signed contracts to sell off my financial practice and am currently in an interim period before everything is finalised.

January 2011