Responsible Consumer Education

1943: Stormy Weather – Stone

There is a little bit of a storm brewing over how RDR is being communicated. The regulator, the Financial Services Authority is being accused that to date, little has been done to inform the public about the sweeping changes that will be upon us all from January. In essence the FSA is calling time on the myth that most financial institutions, many advisers and a significant proportion of the UK population have believed – that financial advice is free. Now of course the truth is that nobody really believed this, but behaved as though they did. This is why and how commission became the way that advisers got paid (from the policy). However, forward thinking advisers, clients and financial institutions have been saying for years, that “the Emperor is not wearing any clothes” or to put it bluntly, there is no such thing as free financial advice.

Fay Goddard, head of the Personal Finance Society has a few choice words for the 2 page online leaflet that the FSA issued a few months ago, yet still appear to have communicated little else to the public. She is reported to have said, “It was an insult in the broadest sense in the way it was worded and didn’t recognise the journey many advisers have been on”.

I have to say that I’ve been talking about RDR (as much as I don’t wish to bother you with dull stuff) within this blog since September 2010 nearly 2 years ago. Clients had been advised before this and anyway, we have been effectively a commission free firm since we set up in 1999. I firmly believe that our clients “get it” and it is little more than a minor detail. However for many people, their advisers are struggling to figure out how or what to charge for their advice, which with a little over 5 months to go, does not bode well.

Indeed on the consumer information page of the FSA site, I cannot see anything about RDR today. It seems mainly to be about PPI and Banking. RDR is a massive change. It means that advisers will have to seek a fee from you. This is something that for many will be a sharp wake up call that they will simply not want, yet as far as I can tell, you would have to search for RDR on the site to even know it exists. To save you (the consumer) the bother here is the link that seems very badly promoted. Whilst it is true that there is “nothing” for consumers to do, it is not entirely accurate, as consumers will have to pay a fee. Colin Wilcox, from the regulator has responded to criticism saying that from August “we do have plans to ramp it up from next month and we’re hoping to get a bit more traction within the national media”. Another 2 page document would be a 100% increase.