Retail Distribution Review

Written evidence submitted by Ken Prosser, Prosser Knowles Associates Ltd

Summary

Having watched the whole of the debate in the House in relation to the detrimental effect that RDR is likely to have on the IFA industry, I feel strongly that it is my duty to try and prevent the erosion of a once proud industry. The summing up of the Debate by Mark Hoban, was to say the least skewed and revealed either a complete lack of knowledge of the industry or, worse still, a revelation of the Government’s seeming determination to kill off small businesses, whilst siding with the Regulators, who in turn have spent years trying to make regulation unbearable.

I hope that the points I will make in the Submission will be factually, rather than emotionally based, but after 50+ years in the industry, then that may prove to be difficult.

Essentially I hope to make the committee think in terms of the overall effects on the industry, if they do not play their part in putting a stop to the nationalisation of the financial services industry, for that is what is seemingly the underlying aim of the Financial Services Authority.

If requested I am happy to give oral evidence at any Committee Hearing and I have no reason to request that any of the information remain confidential.

Memorandum

The main points covered in the submission relate to commissions, grandfathering and the examination process and the seeming lack of a level playing field. Also how the spread of financial services does nothing to present a prudent face

I am 69 years of age and currently a Director of Prosser Knowles Associates Ltd, a firm I established some 25 years ago and which now employs 12 people and, it is hoped, will continue to expand in the future, both short and, hopefully, medium term.

I started in the world of finance on leaving school, by joining, what was then, Westminster Bank, I subsequently moved to a Building Society, shortly before the era of the Low Cost Endowment!

I then teamed up with a firm of local Estate Agents, to handle the financial services side of their business, but after 3 years became disillusioned and created Prosser Knowles and at all times tried to ensure that this is an ethically rather than a reward run business.

Submission

1) Since the financial servicers industry became regulated, initially by FIMBRA the savings ratios in this country have fallen. An educated guess leads me to believe that as commissions have become more of an issue, for the Regulator, there is a correlation with falls in savings. It also has to be said that legislators and regulators continuing interference in pension rules has not helped the savings situation in that area.

2) Complaints against sales by Bancassurers have risen, whilst those against IFA’s have fallen.

3) The increase in regulation has served only, in the vast majority of cases, to confuse the client rather than enlighten

4) Regulation has brought about the demise of many well run providers, and as a consequence reduced competition and handed business to the Bancassurers.

5) Despite the efforts of successive Regulators to bring about the demise of remuneration by commission, the clients rather than the profession have resisted this change. They remain, in the face of growing transparency, relaxed about payment by commission. Certainly they show no signs of wanting to pay for financial advice, and whilst we are happy to be flexible in lowering the amounts of commission taken for larger transactions, that situation remains the same. It would be difficult to see how much one could charge a client for advising on a £20 per month savings plan. If the true costs were to be applied it would take some 12 months to cover our costs alone, and you would have yet another person who wasn’t aware of the benefits that can arise from regular savings, however small.

6) I’m aware that the OFT says that there is no way that a ceiling could be placed on commission percentages. What makes them different to OFWAT, OFGEM and the like who seemingly restrain the suppliers of utilities. Are they not just a (lower) arm of Government who, presumably, be legislated?

7) To move on to examinations, and grandfathering, this whole area has become a cash cow for the education/training industry. I have nothing against examinations per se, but there comes a point in life (mine!) where experience gained over a number of years has a part to play. Ever since the inception of FPC1,2&3 the Regulator and it’s allies have seen fit to take money from IFA’s to support their own industries, all of their income, by the way, coming from the dreaded commission paid by the client! This latest attempt is yet another attempt to get complete their theoretical knowledge. I’d be surprised if it were the last however, and during all of this time there has been no insistence on the main body of Bancassurers taking similar examinations. I don’t call that a level playing field. Someone should perhaps explain to me, and to you, how a cashier in Tesco’s with little experience can sell a financial product, whilst someone with 50 years experience being is debarred from doing so by dint of the fact that they aren’t qualified!

January 2011