Financial advice continues to become expensive. Sadly, despite numerous warnings from advisers about the impact of RDR which came into effect from 31 December 2013, the number of advisers continues to fall. This has particularly impacted the main high street banks and building societies. Today AXA announced that they are closing their relationship with Banks, citing the cost of getting advisers to comply with regulations profitably. AXA provide the financial advisory staff in a “restricted advice” form for the Co-Operative, Yorkshire Bank and Clydesdale it is being suggested that this represents about 450 advisers, not a huge number (unless you are one of the 450) but then again there are only around 30,000 advisers of all descriptions and the numbers are reducing all the time. The number of bank advisers appears to have halved in the last 12 months and I am yet to see a clear adviser charging schedule or fee menu from any bank, that doesn’t simply look like a rehashing of their old commissions.
The regulator (the FCA) is in a difficult position, the goal of creating an environment of clearly charged advice appears to have back-fired, with fewer people able to afford good financial planning. It is probably fair to say that most of the “problems” have been created by banks, which seems to be backed up by complaint data yet again (out today as well). I believe that the UK needs good regulation, but this has become increasingly costly and the new levy for my regulatory fees is reported to be rising an extra 15% this year. This is likely to get worse before it gets better as there are fewer firms to pay the regulatory costs.
Many advisers have been pretty scathing about RDR. Whilst I can understand many of their points, the truth is that clients / investors want clear charges and not fudged information. Commission in its various forms does not provide clarity, neither do the charges applied by Fund Managers, where in fact the costs can be considerably higher than the stated annual management charge. I am also rather sad to report that the regulator had very good reason to challenge how advisers were paid, there were lots of products that paid high commission levels and in my opinion this resulted in bad advice. However banning commission was probably not the answer, but a well regulated, level playing field with clients fully informed and the inability for product or provider bias would have been far simpler. Of course, it was possible to be impartial – I was operating in a transparent fee system from the formation of the company in 1999.
Dominic Thomas: Solomons IFA