The RDR (Robbery of Distributors Revenues)

You will have heard of Christopher Columbus the pioneer, navigator and explorer, whose determination to find a new route to Asia ended up with the discovery of the Americas, but you may not know that he was one of the most gifted salesmen who ever lived.

To achieve his exploring ambitions he convinced the King and Queen of Spain to finance his expensive voyage across the seas to completely un-chartered territories. It wasn’t easy: Ferdinand and Isabella of Castile, Spain, had originally rejected this enterprise on grounds of cost.

How did he get the Spanish King and Queen to change their minds? He was a master salesman who had done his homework, he was a superb rhetorician and he was highly gifted at awakening feelings of excitement and interest in others.

What else would have convinced the Spanish monarch to finance an incredibly costly trip, where the acquisition team may return empty handed – if they even returned?

In terms of returns, let’s just say that this wasn’t a structured product she had purchased with some element of capital protection.

Still, the Spanish Queen handed over the required financing and her blessing and, on the evening of 3 August 1492, Columbus departed from Palos de la Frontera. He didn’t find the trade route to Asia: he discovered what would become America, a far more lucrative continent and thereby created a whole new race for gold, spices, land and glory. But that’s another story.

What people want isn’t always what they need

The average investor is not a royal family in pursuit of the fastest, most profitable trade route to boost their coffers. But the reactions of the average investor will be the same: they will prick up their ears and find their hearts racing more at the sound of a rare, exciting investment that offers a high percentage return.

Very few investors will find themselves enthused about a tailored financial plan that outlines how they can hit their long-term goals while providing some form of capital preservation. Much less are they likely to be happy to spend £1000 to £2000 a year on the advice process for this.

While this may be exactly what they need, advisers offering this tailored investment product will need to be great salesmen – someone who can convince people that paying for advice is the best way to get the best outcome.

The retail distribution review means only those who can ‘sell’ the intangible concept of service will survive. Some of them are already calling themselves “lifestyle coaches” and the regulated products are merely an addition to their client coaching service.

Existing clients with high trust levels are unlikely to object strongly to a different method of paying for the same service, particularly if the total cost is the same and they are using their highly skilled, known adviser.

However, just as the rest of the world moved quickly to compete with the Spanish for control of the Americas, so too providers are moving to compete on cost and volume with IFAs.

But what about growth after RDR?

How many advisers will be able to market to, and compete for, a new client when a tied or “whole of market” adviser can appear free because the cost of advice is absorbed somewhere in the depths of the product providers’ offerings?

In a normal ‘law of competition’ environment, IFAs would usurp the institutional behemoths in the same way that most retailers control most manufacturers in all sectors of our economy, which aren’t regulation driven.

However, it seems the profit has been ripped out of the advisory profession and there is a danger that the only way to continue to make money is to be linked to a provider. To survive, most advisers will need to claim a share of the profit from the manufacturing end. They should not wait too long as the manufacturers are moving back into the advising sector.

Is the RDR really about better advice and better outcomes for the consumer or is it about crony capitalism enforcing providers’ control of the client’s money?

Of course we have seen clearly since 2007 that the heads of these behemoths seem qualified or experienced enough to run all this money – although it tends to run away from them. Just look at what has happened to the banking, insurance and others recently.

Was Ken Davy, founder of Simply Biz and the so-called ‘father of networks’ right when he warned the providers that “assets have shoes”?

Is it not very dangerous to say that sales output is fundamentally wrong as a method of measuring the contribution that an adviser or indeed any business makes to society?

Andrew Carnegie once said: “Able men soon create capital; in the hands of those without the special talent required, capital soon takes wings.” It didn’t escape from Columbus; is it in danger of escaping from government funded behemoths?

There are ways of working with providers to help present a tailored lifestyle option to clients, for which they will happily pay and which will give them the best possible outcome.

With this in mind, you may be interested to check out a complimentary seminar outlining all about the discretionary fund manager propositions, which will be held at the Financial Adviser head office in London on 21st September.

To book a spot, email or visit the Financial Adviser page of the FTAdviser website ( for more details.

Also structured products now seem to be called “defined investments” and in-depth analysis into each new release is freely shared at

I’ll admit: my view may be contrarian and maybe there’s a place for provider-led as well as truly independent product advice in this new RDR world. I’d like to hear your views here.