It looks like the RDR, which arrived in January after a six year wait, has forced many commission-based IFAs to move on. Financial Planners have fared much better but what does the future hold? Laura Dew reports.
When the bell tolled to welcome in 2013 in January, many Financial Planners will have felt relieved to walk into work unscathed and RDR-ready. Not for them the struggle with adviser charging and Level 4 qualifications. But what does the RDR-world look like now all the preparation is over and reality has arrived?
The initial predictions of advisers leaving the industry appear not to have not been as bad as many pundits expected although there has still been an undoubted reduction in numbers of commission-based IFAs. Figures released by the Financial Services Authority in mid-February show that in the summer of 2012 the number of advisers was down 11.5 per cent compared to summer 2011 to 35,899 advisers. Some 2,000 of these were expecting to leave the industry before the deadline of 31 December 2012. However, by December 2012, the FSA said 93 per cent of advisers who were remaining in the market had attained their Level 4 qualifications, two per cent were awaiting results and two per cent were still studying. At the time of writing, the FSA has said it will publish a more detailed report of the figures in March.
Significant decline yes but not collapse. However, during the second half of 2013, departures from the industry could become more apparent as those who thought they were ready find that their skills are not up to scratch. While they may be qualified to Level 4, putting the new RDR business model into practice could be problematic in terms of making adviser charging work, business propositions, trail commission and promoting firms to new clients willing to pay charges or fees.
Financial Planner Adrian Pickersgill CFP^CM from Chatfield Private Client who said: "IFAs are going to have a major headache; moving from commission to fees is not just a switch but a change in mindset, not only for the adviser but for their clients. Clients are going to have a shock when they realise how much they have been paying in commission."
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To assess the situation fully, the FSA has said it will carry out RDR-related thematic reviews in six-month cycles. It said: "The purpose of these reviews is to assess how the new rules are working in practice and to share examples of good and poor practice with the industry.
"In the first cycle, our focus is to understand how the new rules are being applied in practice. We intend to use this work initially as a way of providing examples of good and poor practice to assist the industry in complying with FSA rules. During this period we will take appropriate action if there are particularly severe breaches.
"As we progress through the second and third cycles in late 2013 and early 2014 we will expect firms to have embedded the new rules and taken on board the finding we intend to publish at the end of the first cycle." Supervisory visits to firms will focus on RDR-status, how the firm has implemented the RDR, ability to mitigate risk and adviser charging structures. It will also be carrying out a survey on professionalism in the summer of 2013.

Planning ahead
However, this possibility is unlikely to affect existing Financial Planners who are continuing what they have been doing for years and moving forward.
Steve Gazzard, IFP operations director, said: "I think most Financial Planners are relieved to put RDR behind them. I don't think we will see a massive loss of Financial Planners, in fact I think the industry will grow as we see more graduates choosing Financial Planning, either as Paraplanners or trainee Financial Planners."
David Howell, chief executive of Guardian Wealth Management, also felt graduates were the way forward. He said: "Financial Planning needs to grow its own, it's got to get people who will be starting from scratch rather than someone who is 'contaminated' and will be bringing legacy issues with them.
"We need to get out to universities, graduate fairs, seeking out graduates with business, marketing, finance, law degrees. The Government and the IFP also need to educate people on what Financial Planning is, how it's a profession and it's not just about products."
To help those firms who are keen to make the move to Financial Planning, the IFP has launched its two-day Integrated Financial Planning course. This gives an insight in the practice of Financial Planning and how to create a financial plan.
Mr Gazzard said: "We've had good feedback from the courses we've run so far and the reaction has been overwhelmingly positive. The course moves away from RDR and onto the core competencies of Financial Planning, based on practices from around the world." However, Financial Planner Mr Pickersgill felt it would not be an easy transition for IFAs to move to Financial Planning. He said: "I don't think we will see many IFAs becoming Financial Planners, especially as their lifestyle is used to receiving big regular payments. We're still very niche. I know one person who moved to a Financial Planning model and he said it was very hard. The support is out there but they have to be committed to the transition. " So, while IFAs face an uphill struggle, what are the possibilities for Financial Planners to get ahead?
As a requirement for the RDR, all advisers offering investment advice had to be qualified to Level 4, the equivalent of the first year of a university degree. For some this was a long process involving multiple exams and gap-filling, for others it was a shorter exercise. However, as all advisers are now qualified to this same standard, there is growing pressure on advisers to differentiate themselves from the crowd. Figures from the Financial Planning Standards Board show that there are almost 150,000 CFP^CM professionals worldwide and 950 in the UK. However, since the RDR came into force, the IFP has noted a rise in the number of Financial Planners showing interest in undertaking Certifiied Financial Planner^CM Certification, one of the world's most prestigious Financial Planning marks.

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Demand for CFP^CM certification grows
Lucy Courtenay, qualifications director at FPSB UK, said: "In December 2012 we had 48 new candidates register for the CFP which was double the second highest number of 24 in October 2012. It would be nice to think that they completed the RDR qualifications, gained their SPSs and are looking for the next stage of their professional development. We are now expecting a record number of case studies to be submitted in March- following through from the December registrations. Hopefully this will result in a record number of new CFP professionals."Mr Gazzard added: "There's some people who will always do the bare minimum and there will be others in the industry who will look at the next level and see the CFP qualification as the way forward."
Charlene Edwards, Paraplanner at Brunel Capital Partners in Bristol, recently submitted her CFP^CM Certification case study, having already passed the IFP's Certificate in Paraplanning last year. She said: "I've been Level 4 qualified for two years and had always planned to do CFP^CM Certification as the next step in my progression to becoming a Financial Planner. I found it tough and challenging especially as I didn't have as much time as I'd have liked to spend on it but the process and the preparation was good. I can definitely see more IFAs doing it though as I think they'll have to move to a Financial Planning model if they want to add value to what they're offering their clients. Having CFP^CM certification doesn't necessarily mean you will give better advice, it's down to how you use it but the process does give you confidence." On the other side of the fence, Neil Rossiter from Blackdown Financial, is currently working on his CFP Certification case study, despite already working as a senior Financial Planner and having been in the industry for over 12 years. Mr Rossiter said: "I was looking for something to improve my practical Financial Planning skills to help me become a better Financial Planner. Having looked at the CFP structure and after speaking to some advisers who have passed this exam, I felt becoming a CFP professional would give me these extra skills. In addition, I am looking for some way to differentiate myself from other advisers and am keen to extend our relationship with professional connections."
For those Financial Planners who already have their CFP qualification, Fellowship of the IFP is an option, a Level 7 qualification which requires 12 hours of Financial Planning exams. The Personal Financial Planning exam concentrates on the skills needed to prepare a plan while the Planning for Business Owners paper concentrates on preparing solutions to problems posed by clients. Successful passing of the exam entitles Financial Planners to use the designation FIFP and join an elite group of only 77 IFP Fellows including IFP President Rebecca Taylor and previous Presidents Marlene Shalton, Julie Lord, Jane Wheeler and Paul Etheridge. Candidates are not required to have CFP certification, although it is recommended, but should have at least five year's experience of Financial Planning. Ian O'Connor FIFP CFP^CM, Financial Planner at Astute Financial Planning in Kent, qualified for Fellowship in 2007 having already qualified as CFP^CM professional in 2001. He said: "For me, it was because many of the real Financial Planners I had met and learnt from in the early days of joining the IFP were Fellows and they were the ones who had inspired me and whom I looked up to as thought leaders in the profession.
"They were the hardest set of exams I have ever taken but with proper preparation they are do-able. The IFP Fellows do not think of themselves as some sort of elite club; they are friendly people, committed to helping others and who have gone the extra mile, both in taking exams and then giving back for the good of us all."

The Life Planning approach
An alternative option would be adopting a Life Planning approach to your business. Life Planning founder George Kinder has said he expects the number of Life Planners in the UK to reach 600 as a result of RDR and that the UK has seen the fastest levels of take-up of all European countries which has led to him spending more time in the UK. He said: "RDR really sets advisers up to do Life Planning. At first advisers think RDR is all about fees and how they charge. When they figure that out both as a process and as a conversation with their clients, they wake up at some point and realise that the whole game, the whole industry has changed."
This is an approach being taken by Mr Howell's firm. He said life post-RDR had been "great" and the firm was now moving to offering life coaches as well as Financial Planners at its businesses. He hoped to employ a minimum of 60 Financial Planners and five life coaches by the end of 2013.
Mr Howell said: "I think you need to take a different approach to how you provide your service to clients to give them more than they are expecting. This isn't just about their name on a parking space." However, he stressed the life coaches would be a starting point for clients and the firm would retain Financial Planners to avoid ethical issues or conflicts of interest.
So when assessing the new RDR world, to quote Darwin, "in the struggle for survival, the fittest win out at the expense of their rivals because they succeed in adapting themselves best to their environment", it appears that Financial Planners are not just surviving but thriving in their new environment.

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