What you’re saying about the impact of RDR on IFAs

In a recent FE Trustnet article, Rathbones’ chief investment officer Julian Chillingworth predicted that swathes of IFAs will go out of business in the aftermath of the retail distribution review (RDR), which comes into play next year.

"I think you’ll see a lot of IFAs in their 50s and 60s who will retire early, as a result of not doing the necessary exams and qualifications – particularly those in the small- to mid-size businesses," he said.

"I think there will be a third, maybe even 50 per cent of the community, who will leave the industry as a result of it."

Here are the most interesting comments that the fund manager’s comments provoked. 


"The problem is that platforms such as Hargreaves Lansdown will lose their cut, and guess who will have to pay extra? The investors who don't use IFAs. The answer is for funds to reduce their AMCs to compensate – after all they will be keeping it all now."
Stephen Compton calls for fund managers to rethink their charging structure. 


"No-one has asked the IFA client what he or she thinks – I predict disasters." 
Dave Mattos thinks private investors need to have their say. 


"We all know that RDR is happening, but we don't have to like it. Unfortunately, the end result is that our clients will end up paying more. The providers will, no doubt, be more profitable. The remaining IFAs will be more selective with regard to clients. I, however, will no longer be an IFA. Not because I can't pass the exams (I've already done that), but because I know that my business model as a small local practitioner will not survive." 
RDR will lead Tracey Case to hang up her spurs. 


"I'd guess there'll be a boom in DIY financial management when clients like me are faced with charges of thousands of pounds for advice when we know that we have no way of judging whether it is any good or not. 'Good advice' will presumably mean that every other adviser has given the same advice. Stand by for cheap, electronic IFAs."
Geoffrey Cohen says investors will have to learn to carry out their own research. 


"I am sorry for the IFAs, the FSA has created another mess. The new educational requirements were bound to come, the days of the amateur are finished. In Switzerland they have qualifications for shop assistants. But for the rest, all that was needed was to regulate the TER to 0.5 per cent max for everyone, institutional or private."
Regular contributor Theo ‘Frank’ Pantzaris feels for advisers but acknowledges that reforms are needed. 


"I think that the IFA profession will be reduced by more than half. The proposals will throw small investors into the arms of the banks, who as we already know, are an absolute disaster."
One anonymous user believes Chillingworth’s controversial prediction is understated. 


"To my mind the only way that IFAs will be taken seriously by individual investors is if they have skin in the game. Their fee should be invested in the client's portfolio so that they feel the same pain (and elation) as the client. If they were forced to defer their payment for say two or three years it would transform the IFA/client relationship. Oh and I am doing an exam next week and I'm 62!" 
Veteran IFA Paco Quay has interesting ideas about how to align investors’ interests with the rest of the industry’s. 


"My reason for leaving the industry was quite simple – fund managers lost sight of who they were actually working for, charges were far too high and returns not good enough. It is the IFA that ultimately carries the can for poor performance. The industry as a whole needs to raise the bar and this is part of the overall solution. Glad I retired when I did!" 
Disillusioned adviser David Rumsey says asset managers need to remember who they work for.