I had to smile when I heard from a product provider last week that some advisers are struggling with a few basic elements of the Retail Distribution Review (RDR).
One advisory firm apparently submitted client applications with the ‘adviser charging’ section crossed out and replaced with the words ‘3% commission’.
A member of the admin team picked up the ‘mistake’ and assumed it was an error, until they realised a whole bundle of applications had been altered.
Of course, it did not take a compliance officer to point out the applications could not go through and they were dispatched back to the adviser firm. I have yet to hear the outcome of the conversations between provider and adviser, but what are the conversations with the individual clients going to be like?
What is an 'honest mistake' post-RDR
If it is hard telling a client they need to pay a fee for something they think has effectively been free, it is surely even worse to have to tell a client you filled in the application form on their behalf incorrectly.
Do you even try and explain what you did could be viewed as fraudulent by some? Let us be charitable and suggest this was an oversight on the part of this individual firm.
It may be the adviser meant the business was being placed on an execution-only basis, in which case the application forms were not entirely wrong.
Frankly, whichever way you look at it, it does not appear great, but ironically the adviser at heart was acting in the interest of the clients, who clearly needed advice, but, perhaps, currently would not pay for it.
No doubt as we all get into our stride there will be more cases like this. There are certainly numerous stories of individual advisers without the requisite level of exams or CPD still effectively operating as advisers. Or as many people now choose to describe themselves – ‘introducers’.
I do not want to get too moral about it, but look at it this way: even if you are an experienced driver, most people are not stupid enough to drive without insurance. The exams are the ‘insurance’ for advisers. I know, and most advisers realise, the exams per se do not make you a good adviser, but the letters after your name or the certificate on the wall is the insurance.
Ironically, it is this which clients are paying for when they are presented with a bill for advice. They may not realise it, and perhaps advisers should point this out.
No doubt the regulators will ‘uncover’ some of these mistakes when they start auditing adviser firms this year, and rather than taking the ‘naming and shaming route’, it would be good to see them take a more long-term view of life. The bottom line must always be about the clients, and if it takes advisers a bit of time to get used to the new regime, then the odd mistake here or there is surely acceptable?
Lawrence Gosling is the founding editor of Investment Week. His views are his own, any comments to him at [email protected]
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