And the results are in! Well, sort of.
Paper TR13/5 sets out the FCA’s initial assessment of how firms are getting on with the RDR. The tone of the report feels a bit like what you’ll hear as school kids on the assembly line at the end of the school term when the headteacher, Mrs Browne gave her assessment of behaviours during the past term. You know some of your peers have been naughty over the past term but you aren’t quite sure what she makes of your own behaviour too.
I subjected the paper to a bit of text analysis (see the text cloud above). It’s not overly authoritative but sets out in no unclear term what is expected of advisers.
I counted 22 appearances of the word ‘should’ but the word ‘must’ only appeared 6 times ! (I’m really sad, ain’t I? I know) I hate to say it but I think this is the clearest the regulator has been, particularly on fee-charging and disclosure.
The paper is a must- read for all advisers off course, but we can distil its essence down to 5 major commandments…
- Thou shall disclose thy fees/charges in cash terms, written in blood
Percentages aren’t good enough, you have to do make it clear in pounds and pennies. Half the population can’t do percentages (That’s not in the report but the regulator must know this right?)
Hourly rates alone aren’t helpful either (who do you think you are? Accountants? Lawyers?) You have to give people a good idea how long the work might take and how much they can expect to pay. No one wants to write you an open cheques.
Generic client agreements are probably not good enough too. Personalise it, stating the specific fees relating to the client and get them to sign it.
- Thou shall provide each client with your fees/charges, in good time before providing any services
Probably best to give this to them BEFORE even meeting the prospective client. The idea is they can make a decision as to whether they prepared to pay your fees (and possibly compare with other advisers’) before they meet you. Yes, really.
This should also enable them to grill you about your fees when they finally have the pleasure of meeting you. Clear?
- Thou shall make it clearer than crystal whether thou art independent or restricted.
If you are restricted, just say so already and tell everybody ‘how’ you are restricted.
The problem is when you think you are ‘independent’ but aren’t really. This is the woolly bit in the report. The paper refers to a firm placing almost all its business on a single platform and a predetermined list of products, suggesting that they are not independent.
- Thou shall make it clear what your ongoing services are, the cost and how/when clients can cancel
You have to make it clear that ongoing service is optional and if client no longer needs/wants your services, how they go about ending the agreement.
- Thou shall make your client documents simple and easy to ready, where possible beautiful too!
Yes beautiful. Consumers like ‘visually appealing documents’. And you should give them these by using tables and colours. Don’t go overboard with it, just make it ‘appealing’.
And mind your language. Stay away from industry-speak like ‘relevant market’ and ‘holistic.’ Consumers barely understand English Language, why do you need to speak to them in French?
One more thing, before you ask – ‘if I do all these, will it be enough to satisfy the regulator?’ ..the answer is ….. who knows? They regulator are coming back in October with a more detailed report and I’m sure they’ll have a lot more to add to this list!
OK? Good. Now go off and do as you are told!