FSA review to make advice less available, more expensive

The FSA's Retail Distribution Review (RDR) has the potential to affect both the availability and quality of financial advice according to Jeremy Deedes, Director of Planning for Life. This is the view emerging in the financial planning community as it debates two RDR related issues, both of which are pertinent to Planning for Life's position in the market place, and both of which give rise to two important questions for consumers. We would like to hear your views:

• Are you prepared to accept a lower or restricted level of service, but for a lower fee?
• Higher qualifications lead to higher fees, but potentially to better advice; are you prepared to pay higher fees for greater quality and depth of advice, or would you be happy with lower qualified advisers charging lower fees but more oriented towards advised product sales than financial advice?

The first question has been precipitated by new research into the link between client segmentation and profitability, which suggests just a handful of clients can generate more than a third of a financial planning firm’s annual revenue.

In generic terms, "segmentation" is regarded as absolutely necessary to business success. A one-size-fits-all service does not work. The onset of the RDR has led some to argue client segmentation will become a necessity for financial firms in order to remain competitive, but to the detriment of thousands of clients who will not be able to afford top level services. To this end, the argument runs, segmentation is immoral.

The widely accepted counter-argument is that it makes sense for both the adviser and client to match the right service to the right client.

The second and related debate is about qualifications, and whether all advisers should be required to hold high level qualifications. Some argue that the RDR requirement to reach Level 4 qualifications had not gone far enough and is pandering to "commission-based, low quality" advisers. Others argue that Level 4 is more than adequate for the majority of advice given to UK consumers.

These are not just intellectual questions. They really affect they way you will receive advice after 2012. At Planning for Life we have adopted the segmentation route by offering a range of services from the comprehensive Freedom service to an entry level financial planning service (Pathfinder); we believe that segmentation will make financial planning more, not less, available. We have also adopted a policy of top-level qualifications.

What do you think? Do you agree with our position on these subjects? How would you answer the questions above?