Someone recently said to me that the so-called ‘RDR 1’ in January 2013 was all about advisers with new professional standards and the introduction of adviser charging.
Our experience at Novia has been that our advisers prepared well for the new world and seem to have sailed through it totally unscathed.
That same person also stated that the ‘RDR 2’ was all about platforms, with the abolition of cash rebates to clients for new money from April 6 this year but also for existing money already on platforms if that money goes through a so-called disturbance event (rebates can of course still be made in the form of units to clients).
The platforms that offered bundled pricing also have to deal with the abolition of rebates to platforms which are to be replaced with a platform charge by April 2016. This is a lot to deal with.
The response to change by platforms has been less smooth than the adviser experience and rather like King Canute famously believing that he could hold back the tide, a number of platforms still seem to be trying to block the changes that the regulator wants.
In no particular order we have seen, first, one platform seemingly state that it could get round the cash rebate ban by investing all unit rebates into a single cash fund instead of directly into a cash deposit thereby achieving the same thing as if cash rebates carry on as usual.
There are real practical issues, such as taxation and the fact that cash funds are not permitted in stocks and shares Isas, but you also have to wonder at the wisdom of openly trying to frustrate the FCA’s ambitions.
The reason for the ban being imposed in the first place was because some advisers were openly claiming that their advice was effectively free as the rebates they could achieve were more than the charges the adviser was making.
Then we have another major platform that has many billions of assets invested in its bundled pricing model argue for the abolition of the sunset clause on rebates to platforms and for them to be treated in the same way as cash rebates i.e. subject to disturbance rules.
At the same time this platform is arguing that two-thirds of its assets are already well down the route of moving to the unbundled charging structure and so you have to ask that if this is indeed the case, then why would it argue to change the rules when it has progressed so well down the road to an unbundled model with more than two years still to run?
We have always thought that the abolition of rebates to platforms was a critical issue for platforms that previously operated a bundled model because if they cannot move their clients over to an unbundled model, then their income dries up (as does commission) and you really do wonder what success they are actually having in getting clients to convert.
