Retail Distribution Review

Written evidence submitted by Preston Anderson, Financial Adviser

1) I am a Financial Adviser working in a practice called Aitana Financial Services, which is a well established practice of Financial Advisers for over 17 years.

2) I am writing with regard to the Retail Distribution Review, part of which I firmly believe are prejudicial to the provision of financial advice that should be available to the majority of the average persons in the UK.

3) I personally have within the practice a client bank of 450 clients, which are funded on a transactional approach for my remuneration. This means that when I sell a suitable pension/investment/protection or mortgage product, I am paid commission on an accrual basis and if the client stops paying or cancels during the initial period, my commission is clawed back by the product provider or (Insurance Company).

4) Even though my remuneration is on a transactional basis, my clients have the opportunity to get advice from me as and when it may be required, on tap and at no cost to them as part of my service.

5) These clients are ordinary people and either would not be able or most certainly be willing to pay a fee and would therefore not seek the advice that they in particular need.

6) The commission amounts are transparent and detailed on all illustrations/quotes and are always discussed with each client before they decide to accept any recommendation.

7) This process has been in operation for some time without, I understand, any detriment to the clients.

8) RDR as proposed on remuneration (i.e. to outlaw commission) would I my view make financial advice available only to ‘High Net Worth Clients’ who are most likely paying for their advice by way of fees already. RDR would probably alienate the ordinary person looking for advice.

9) I firmly believe that with current poor take up of savings, pensions, and Life Assurance protection amongst the mass market, the adoption of RDR will do nothing to increase the take up. In fact I fell it will most likely increase the current gap to the disadvantage of the average UK citizen, because as it’s always been ‘pensions/investments and protection needs to be sold as opposed to self purchase.

10) Perhaps the client having a choice between the two routed of remuneration would be a better choice.

11) On the other point within RDR, the improvement of professional standards and competence is a good thing for the future. However I am now 62 years old, I have been in the industry 22 years, I passed my FPC in 1991 before it was mandatory. Under the new rules I would not be able to practice at the end of 2012, unless I put several hundred hours of study to comply with RDR. Up to this point I intended to work up to age 67 to coincide with my wife’s retirement.

12) I therefore have little option to take time out to study, not so easy at this age. Or I have to leave the industry and leave my clients to whoever follows.

13) I understand that will apply to a lot of my colleagues who are of a similar age and are also erring on leaving the industry.

14) I believe that examinations should apply to new entrants of the industry and perhaps to anyone under the age of say 55.

15) Advisers above that age should surely be able to continue practicing with strict CPD under what is referred to as ‘Grandfathering’.

16) If this amendment to RDR is not considered there will a great loss of many long term experienced advisers, again to the great disadvantage of the majority of the UK client base. Their financial affairs/protection will not be looked after in the way it is now. This may mean they would need to lean even more heavily on the state when they need financial support.

In conclusion, I believe that RDR as currently proposed is not fit for purpose. It does not bring financial advice to those that need it most, or give them more protection when dealing with Financial Services. In fact it will certainly have the opposite affect by insisting on fee payments, and that the older adviser sit further examinations thus forcing them to consider leaving the industry which will, leave many clients disenfranchised.

January 2011