Retail Distribution Review

Written evidence submitted by Mark Loydall, Cambourne Financial Planning Ltd

I read recently that you were looking for pro RDR IFAs to contact you. Thank you for interest in the subject. It is reassuring to know that politicians are taking an interest in the RDR as it is certainly something that has the potential to affect the livelihood of so many people. I would not describe myself as pro RDR but I believe I am relatively knowledgeable and objective about the subject I will try and to add some balance to the debate.

· Much of the vocal criticism of RDR has centred on examinations. It is actually very hard to defend the current position with regard to exams and the need for a higher professional standard cannot be disputed. However, among my own clients I have some Doctors and I have heard them criticising other older Doctors who do not have the current qualifications as they were grandfathered – if Doctors have been grandfathered why is it wrong for IFAs. Indeed I have allowed one such Doctor to inject me into my spine as a result of a sports injury – he is an expert in his field and although in today’s terms he is not considered qualified I had no problems with using him. Why is it proposed to be different for IFAs?

· There are question marks over the legality of changing the qualification regime through the RDR. Not only are their questions within UK law but there are also questions within European law – I can see this causing a major dispute in the future.

· The CII and other are hardly an unbiased bystanders in all of this debate - they make a great deal of money from people taking their exams and it is in their interests to get more people to take their exams. It is no coincidence that since RDR came along that the CII, the main exam body, has seen increased revenues.

· The most major aspect of the RDR is how it affects the relationship between advisers and clients. This is where the biggest changes are likely to occur and where the largest cost for IfA firms is likely to be. The training that is needed and then the changes to business practices will add to the immediate costs of IFAs. Much of this cost is likely to be one –off  however some of it will be ongoing. For example my own firm is currently seeking to appoint and operations manager and a good part of that role will involve ensuring our systems are RDR compliant. This is excellent for the general economy as it is a new job however it is not so good for our cost base.

·  It is difficult to see that everything within RDR is being done has the best interests of the client at heart. For example most RDR quotes for investment business based on explicit charges where all costs are taken on an initial basis (as per RDR instructions) actually offer worse outcomes for the client than non RDR quotations based on the same charges but where those charges come out over the first 3 or 5 years of the investment plan. The charges are still explicit but not "clean" as the charges continue to be taken over the first period of the contract. I would be happy to provide you with some example of this if required.

· Some of the aspects of the RDR – the Ronseal aspect – that everyone must have a clear offering, say what they are going to do and then actually do it are good. However, the problem here is in the detail. In my experience the FSA are not very good at telling us exactly what they are seeking at an early stage. A typical case in point would be the Treating Customers Fairly  requirements. It is now very clear what is required and I believe IFAs are working very hard to achieve these. Unfortunately that clarity was not there at the start and the FSA did not make it easy for people to understand the detail of what they were looking for. We are seeing a similar pattern of events now with RDR so whilst the clarity that RDR will create for clients is to be applauded the lack of specific guidance is a concern.

I hope this is helpful and gives a balanced view of RDR. DO feel free to contact me if you wish to discuss further any of the points that raised.

January 2011