A lack of understanding, perhaps?

Some research has just been published about IFA progress towards level 4 qualifications ahead of the RDR.

It seems that smaller IFA firms and individual advisers are more likely to have acquired level 4 qualifications than those working for a bank or large firm.

The research published in a well known industry newspaper attracted some comments from the readers. The discussion moved slightly away from just qualifications and respondents started to comment about the way in which consumers might pay in the future.

I am happy to show some of those comments below because they came from anonymous sources and I don’t therefore feel I am invading anyone’s privacy.

But in my view they constitute a continued lack of understanding that is quite scary combined with a tremendously negative mind-set.

First example

“And the FSA has still not addressed the fundamental problem with RDR which is that people do not like paying fees. Why is the public not being given a choice?”

The RDR does not require any consumer to pay a fee. Adviser charging does not have to involve the consumer writing out a cheque.

The cost of advice can be deducted from the investment made. If the adviser wants to continue to work on a “speculative” basis and only charge if the client buys a product they may continue to do so.

Why continue the myth that the RDR requires the payment of a fee?

Second example

“I am level 4 qualified and will be giving up my Investment authorisations after 24yrs (without a complaint) as I don’t feel I have a critical mass of HNWC and the IFA element is 35% of my business. I will instead introduce this element (for my clients willing to pay a fee) for a split, save myself the FSA/MAS/FOS/ etc etc fees/levies and focus on GI, protection and mortgage business.”

Why perpetuate the further myth that the RDR is about High Net Worth clients being the only clients of the IFA?

The Cap Gemini Merrill Lynch World Wealth survey defines HNW as typically being those with about £650,000 to invest. I dream of all of our clients being HNW!! The majority are middle or upper mass affluent not HNW.

Yet again, we see reference to them having to, or be willing to pay a fee- just wrong

Third example

“Just because I have reached level 4 status it doesn’t mean I can earn a decent living after 2012 so I will not be advising on investments after this date. The exam was taken more to prove that I was capable rather than as a requirement of the FSA. We will only know the true number of advisers left once RDR has started.”

I wonder what the writer means by a “decent living?” Why might they not be able to earn a decent living in the post RDR world?

I wonder if perhaps this has less to do with the methodology of payment (replacement of commission with adviser charging) and more to do with a lack of confidence in the proposition.

If you engage with a client and tell them how much you are going to charge then you had better have something that is valuable to the client or they are going to say “no”.

Perhaps the somewhat opaque nature of some commission based propositions is going to be exposed to the light and with consumers valuing transparency you can start to see the problem with which some advisers are faced.

A state of mind

A suitably qualified adviser armed with a thought through well articulated proposition, on which the consumer places value, is going to have a fantastic opportunity pre and post RDR.

Those with a more negative mind-set are going to become great examples of a self fulfilling prophesy.