The Retail Distribution Review (RDR)

On 1 January 2013, the Financial Services Authority is changing the rules about how financial advisers describe their services and the way consumers pay for them. These changes are commonly known as the ‘Retail Distribution Review’. At the end of this post is the FSA consumer leaflet for your further information.

You’re likely to hear more about this in the media over the next few months – I’ve mentioned it in previous correspondence and I wanted to make sure you heard about it, in full, from me first.

What the new rules mean

Whatever you may hear, these changes do not mean that you’ll have to pay any more in the future for our services or the products we recommend. The new rules are designed to make sure it’s clear what services financial advisers offer, how much we’ll charge you, and that you formally agree to all of this before we give you any new advice.

We’re not planning to make any major changes to either the services we offer, or how much you’ll pay for them because we already explain our services and how much they cost before we start work for our clients.

Therefore our relationship with you will not change in the future.

There’s no need for you to take any action

As you can read on the graphic below, I already provide a service entirely compatible with the new format (and have done for years and years), I hold the necessary qualifications for the business I advise on and I have a statement of professional standing in good order (see below).

Communications from providers

You may also hear directly from your product providers over the next few months. The changes to the rules and how financial advisers operate means they’re likely to make some of changes to their products, especially the older ones.

I should be notified of any changes providers plan to make to your products, so there’s normally no need to tell us if you receive a letter. But if they’re making changes that impact you and you have any concerns please get in touch straight away, I’ll be happy to clarify anything.

Making better financial decisions

What matters is that you do get in touch with me if your plans or circumstances change. Whether there’s been a major event in your life, or you’re reconsidering your plans for the future, we’re here to help you make the right decisions to help achieve your financial goals.

Making the right decisions today can make a huge difference in the future.

Below is the FSA (Financial Services Authority) consumer guide that I enclosed with the letter
 

Boiler Room Guidance

Last week, three people were jailed for their part in a boiler room scam dating back to 2007
http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/073.shtml

I thought it worth reminding clients that as part of our service Green Financial have long offered: “The Second Opinion Service” – this is where we make ourselves available to consider new ideas, wherever they may originate from

Over the years clients have utilised this service in many ways, from having us check the ‘small print’ on accounts offered by banks (we’ve helped clients avoid tie-ins, falling rates and hidden high charges)

Other times clients may have read in the press of an investment fund and want to know if we are aware of it and have considered it (usually the answer is yes)

TOO GOOD TO BE TRUE

More often than not it is a client’s friend or colleague who has heard of a tax wheeze, scheme or investment that seems too good to be true (and it usually is!)

One such example was a client who called up recently informing us of a ‘share opportunity’ they had been telephoned about out of the blue. They were wary and my alarm bell immediately rang. A little swift research on my part indicated the company offering the shares were not FSA (Financial Services Authority) registered and that the company appeared to only have a PO Box communication address. I warned the client off the venture and they agreed. When the company called back, the client told them they had discussed the matter with their IFA, did not wish to hear from them again, and if they did call back would pass their details to me and the FSA to deal with. There were no further calls.

BOILER ROOMS

As mentioned at the start of this post, three people were jailed last week, for a total of 19 years for a £27.5m boiler room scam.

Tomas Wilmot was sentenced to nine years in prison while his sons Kevin and Christopher were given five years each.

The trio were convicted of conspiracy to defraud. The Wilmots had a syndicate of boiler rooms that defrauded around 1,700 investors out of a total of £27.5m. Like so many boiler room scams of the past, many of the victims were elderly and often suffering from serious illness.

SO WHAT IS A BOILER ROOM?

As with the Wilmots, a boiler room is typically a ‘fly by night’ business but these days are usually well organised, well funded and seem plausible. They typically use high pressure sales techniques to sell ‘sure-thing’ (in my language, too good to be true) investments with a promise of massive returns. What they are normally selling is either worthless stock in unquoted companies or often stock in companies that don’t exist at all.

The more complex boiler rooms, rather than lasting for a while, then suddenly disappearing (only for the same people to pop up elsewhere under a different name) sometimes migrate to actually giving back a few returns initially, thus lulling the purchaser into a falso sense of security. These are then known as ‘Ponzi’ schemes , made more famous recently by Bernie Madoff.

HOW DO THEY WORK?

It is normally a telephone ‘cold-call’, using phone numbers easily obtainable from publicly available lists. Think how often you are asked for your details and how many organisations have your number. The UK actually has laws against this type of cold calling but it doesn’t stop the fraudsters. They simply base the callers abroad. It could be as near as mainland Spain, continental Europe, the US and even as far afield as India these days. This means they are beyond the jurisdiction of the FSA and can approach, anyone, anywhere, anytime.

Boiler rooms look and sound genuine. As I’ve already said they can seem perfectly legitimate and have many ways of putting this across. They may name drop companies you have heard of, have a genuine looking UK address or phone number and of course a professional looking website. The sales staff are VERY persistent and may continue to call for months in the hope of wearing down the recipient or catching them off guard.

Even those that consider themselves experienced investors may get caught out.

The FSA say that they reckon the average victim of a boiler room scam loses £20,000

I’ve said it before and I’ll say it again, if it seems to good to be true, it probably is.

WHAT IF YOU ARE CONTACTED?

If you are a client of Green Financial and you are ever approached, remember to take advantage of The Second Opinion Service before committing.

The FSA say if anyone ever telephones you univited offering shares for sale, don’t worry about being polite or offending the caller, just hang up.

You can also call the FSA on 0845 606 1234

The FSA also have more information on their website :
http://www.fsa.gov.uk/Pages/consumerinformation/scamsandswindles/investment_scams/boiler_room/index.shtml

Commitment

Combined with todays early morning motion and debate in the House of Commons, I recently read an article in a professional magazine (MDRT, Round the Table, Commit to your future) which has prompted me to write this blog post.

The article discussed how keeping pace with change requires constantly renewing commitment to clients and the financial services profession.

It occurred to me this might be another area where I undertake a lot of work ‘backstage’ but I am guilty of not telling clients and putting it ‘frontstage’.

The financial services profession is often overloaded with uncertainty. Changes in economics, legislation, tax, Government, products, providers – the list is endless.
Even I am guilty in a small way having changed my company operating name a few times over the last few years.
In fact it seems change is the only certainty.

And this is true of other professions, not just the financial world.

I see part of my role for my clients in bringing certainty, in an uncertain world, to their financial life.

I find many clients are calling for an evolved adviser. They want someone who is always learning, adapting and growing with each change to the marketplace rather than retreating.

In the House of Commons today the FSA ‘RDR’ (Financial Services Authority Retail Distribution review) was being debated, with many MPs opposed on behalf of their local IFAs. There are parts of the RDR I am opposed to – I think that unfortunately it will make it easier for the banks to sell unsuitable products to the mass market – and thus continue ‘mis-selling scandals’ – but there are giant swathes of the RDR that I am massively in favour of.

One of these is education.

Since starting as an IFA (15 years and counting now) I have undertaken Continuing Professional Development each year. I also make sure I have at least the minimum educational requirements whenever they are changed (I currently have more than the minimum) and I continue to take exams in areas I operate in (next up is the Society of Tax and Estate Practioners Trust exams in early 2011)

Commitment to Education
As an adviser I believe education is the cornerstone of continued success for my clients. Not only what is in my head but also paying large sums of money each year for access to the very best professional minds and publications available. If I don’t know the answer myself, I know a man (or woman) that does.

But it is not just education that makes a financial adviser. So here are a few other commitments that I make personally and as Green Financial.

Commitment to Expertise
There is a difference of course between the kind of experience and knowledge I am referring to and that which anyone can google. If looking for an answer that has serious consequences for a client’s finances, I know I’d rather it was coming from the mouth of an expert in the field rather than Wikipedia! Information and data are everywhere, knowledge and wisdom are harder (and more expensive) to come by.

Commitment to Green Financial clients benefit
To analyze what is working in the business and re-evaluate any areas found in need of attention
Build long lasting strategic alliances and professional connections
Assemble a team of experts and professionals

Commitment direct to Green Financial Clients
To offer a bespoke, personalised service, where ‘everyone knows your name’
To strive to exceed expectations
If it ever goes wrong, admit it, and put it right
Help clients understand how new rules and regulations affect them personally
Maintain a genuine concern for clients’ objectives (see also http://www.iangreen.com/ethics.php )
Never, ever forget that it’s your money

Commitment to my professional standing
To give back, by being an active member of local, national and international professional organisations (see future blog post for more on this)
Strive to be on cutting edge, to lead and educate, but to retain traditional values
Learn from other professional experts