RETAIL DISTRIBUTION REVIEW- HAS IT WORKED? 19.02.14

RDR was meant to create a profession. It is also necessary, therefore, for the public to perceive it as such. Else what is the point. This is and was not an easy task. The other question that needs to be addressed is “who was the profession meant to serve?”

Have they created a profession? Possibly. Certainly there are now minimum standards of education, though the bar has been set low compared to other professions. As a dual qualified professional I think I am in a place to comment here. It is a start. Some members are certainly professional in their interest in education and serving their clients. Others inevitably still cling to their old ways of working. This being a limited view on the investment world and in some cases sticking to product sales and not embracing financial planning using cash flow modelling. This latter point is significant because it provides clients with more information on which to make an informed choice on how to spend their money. How much do I need when I retire? How much should I save for the future and why and how much can I afford to spend now? Most clients have no idea and certainly have no idea about the impact of inflation let alone tax on their affairs. Even the back office software has no idea about what rates of inflation to use.

For instance, Dynamic Planner, which in my opinion is very good back office software, uses 2.5% for inflation . Inflation over the last 60 years has averaged at 5.9% p.a. and the rate for elderly people in respect of what they spend their money on is even higher.

Is the Public aware? In my experience they are mostly unaware, but if they are, they do not really understand the implications for them. More needs to be done to educate the Public.

Who is the profession meant to serve? I am not convinced that this has even been addressed properly by anyone; the regulator or the politicians. The end result is that it is not economic for a Financial Adviser to provide services for clients with say less than £100,000 and even that in some circles seems to be too low a figure to be commercial for the Financial Adviser. In my experience clients and prospective clients often think they know much more than they do about financial planning and investments and pensions until I have a session with them. Then they realise how little they know and I do not know everything that there is to know. This includes qualified practising Chartered Accountants as well. Which proves that people do need advice in areas that are complex like tax, the impact of inflation and tax on investments and pensions which are always made more complex by each governments attempt at simplification. Let alone how to build a portfolio and what to buy and when.