Over the last decade, the U.K.’s financial industry has undergone a transformation. That’s because regulators introduced the Retail Distribution Review (RDR), starting in 2006, which has pushed advisors to better serve clients.

RDR is similar to Canada’s CRM2, in that it was designed to boost transparency around advisors’ fees and commissions. It also introduced a minimum qualification level for all advisors in the U.K. (the final stages of RDR were implemented in 2013).

Read: Pointers on CRM2 reporting

So, Canada can learn some lessons from the U.K.’s experience with RDR. For example, one of the biggest impacts of the reforms was many firms exited the advisory business once the new rules were finalized, says Chris Hannant, director general of the Association of Professional Financial Advisors (APFA) in London, England.

Hannant, who presented at the Strategy Institute’s Conduct and Compliance event this week, notes this mass exit of firms resulted in too many clients looking for help but refusing to pay high fees. As such, U.K. regulators have continued to monitor whether advisors are being open and fair with clients.


The good news is the U.K. industry is rebounding, with the number of firms rising once again as of 2015. Even better, many firms have seen profits grow since 2013.

Read: MFDA gets top marks for CRM2 explainer

For more on what we can learn from the U.K.’s recent regulatory reforms, see a collection of our event live tweets below.

Live tweets — Strategy Institute’s 2016 conduct and compliance event

And now, from London, APFA’s Chris Hannant is ready to go! His presentation is titled “Life without #commission: U.K. experience of fee-based advice.”

There is life without #commission, says Hannant. U.K. has thrived under new rules for a decade. Easier once firms set out plans. #compliance (Read: Research shows banning commissions is not the answer)

But U.K. has fragmented market, says Hannant. Overall, about 12K firms and 22k advisors. Can be independent advisor or appointed rep (for more on what U.K.-based appointed reps are, read: https://goo.gl/tDgJFh).

Moving to a fee-based model wasn’t about banning commissions. It was about boosting financial industry transparency: Hannant. One reason people left the U.K. industry post-commission ban, he adds, was all advisors had to re-take tests; no grandfathering.

Hannant notes U.K. regs also banned commissions b/c record levels of new business coming in, but AUM stagnant. Fees too high, regs said.

U.K. regs also wanted redesign of advisory firm businesses, so fairer treatment of poor vs. wealthy clients. Moving to fee-based does this.

Overall, says Hannant, took 8 years to move from commission to fee-based model (2006 to 2014). Final rules came out in 2010. He finds the biggest exit of U.K. advisors during this period was seen in 2013, when rules were being put in place (many were close to retiring). Then, numbers rebounded in 2015.

(For more on current client trends in Canada, read: 5 client trends advisors must understand: IIAC. And, for more on CRM2, read: Pointers on CRM2 reporting)

Most surviving U.K. advisors seeing rise in profits, post commission ban: Hannant. And, remaining 1/3 aren’t struggling as much to adapt (for more on communicating your value to clients, read: Knowing, communicating and pricing your value)

Says Hannant, “Even with commission ban, still some commission revenue coming to firms.” #compliance

After regulatory reforms in U.K., too few firms stayed in business, says Hannant. Then, many clients looking for help, and some not willing to pay fees. To help, U.K. regs launched industry review. The lesson? So make sure you’re being open, fair with clients as CRM2 fully implemented.

In the wake of U.K. commission changes and regulatory reform, U.K. has seen more robo-advisors. But those firms have yet to attract lots of clients. (Read: Can your practice compete with automated advice?)