Advice on Trial

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In recent years it has often felt that advice has been on trial; that there is a “gap” somewhere. So, what exactly is the “advice gap”, where does it come from, and how do we close it? In 2012, it seemed every trade press article predicted the demise of advice, with consumers sure to baulk...

Vertical integration; the myth is finally being exposed

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If there’s one thing guaranteed to get me on my soap box, it’s the prevalence of vertical integration in financial services. There’s no doubt that it is polarising the profession and, in my view, skewing client outcomes. I am therefore delighted that the FCA is proposing action on the subject. The RDR ‘loophole’ Let’s cast...

Thoughts on a momentous year

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Earlier this year, I wrote about how RDR was simply part of a journey not a destination in itself. 12 months ago, we were all looking towards the implementation of RDR with a degree of trepidation. Would our preparations be sufficient? Would clients be prepared to pay fees?

In truth, our worst fears were unfounded. Clients have seen the benefits of a fee based world and I genuinely feel that most IFAs are now firmly convinced of the benefits of continuing on the path to even higher levels of professionalism.

Regulatory change has continued unabated. RDR II, or the platform paper, will have profound effects on our profession and the key players within it. The principles that it promotes are laudable and should remove some of the “smoke and mirrors” within the investment industry.

RDR really is a journey

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Sometimes in life you have to look beyond rules, norms and custom in order to see clearly why we do things the way that we do.

For the first few years of the M1, there were no speed limits, probably because most cars of the era were simply not capable of very high speeds. It was a series of high profile incidents involving powerful cars conducting speed tests which finally alerted the government to the dangers of the growing motorway system and the 70mph limit was born.

Debate: Do networks need to vertically integrate post-RDR?

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Steve Young recently contributed to a debate on whether or not networks needed to be vertically integrated post-RDR. He was debating with Sanlam UK’s Giles Cross, who believed it was necessary.

Each side had to write twice on the matter – firstly an opening statement, and then upon seeing the other side’s argument, a rebuttal. Below is the contribution from both sides, kindly reproduced with permission from FT Adviser.

Arguing for the motion: Giles Cross, Sanlam UK

RDR demands that a company clearly defines its proposition; what it does and what it doesn’t do. This immediately leads to restriction.

What happened to old fashioned values?

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Is it me? Is this country in danger of sinking into an abyss of dishonesty, deception and indifference? Whether its horse meat in burgers, LIBOR fiddling bankers or nurses leaving patients to die in their beds, not a day goes by when the news is not full of stories that suggest that the British people may have been shorn of their instinctive decency.

When did it become fashionable to cheat? When did it become acceptable to put profit before straight dealing? When did the narrow interests of the few become so much more important than reputation and the wider interests of the community?

Diversity on the High Street

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Just watched a fascinating article on the Totnes pound and how local traders in that small town are seeking to promote the benefits of local independent traders.

Many town and city centres are dominated by national and international brands and it can be very difficult to find any choice as these shops are full of homogenised products often sourced or manufactured in China or the Far East.

In my experience, small independent shops often deliver real choice and they pour passion and care into their products which the big retailers can never match.

And the same principle applies to small IFA firms.

Segmentation – the Emperor’s new clothes?

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Every day I seem to read another article about the advice profession which blindly refers to segmentation as the key to the future IFA practice. At the risk of flying in the face of accepted orthodoxy, I am going to argue that this is a gross over complication of what is a simple exercise in commercial management.

Historically, many advisers have been happy to advise clients based upon the sure knowledge that the total amount of commission earned would provide a good income after costs have been deducted. Post RDR advisers will need to have a plan to deal with those clients whose fees do not cover the cost of giving advice. As I see it there are 3 simple choices:

Moving to Adviser Charging – All a bit of a mess

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(Previously) Bundled Platforms

At one stage I thought the migration to Adviser Charging might actually be alright on the night.

Having digested the FSA policy statements, I had a pretty clear view of the world to come. It was all pretty easy really. At the next ‘advice event’ with each client, the adviser would explain his post-RDR menu of services and agree (or reconfirm) the level of service and associated cost; the client would instruct accordingly and the adviser would either invoice the client for ‘adviser charges’ or take their instruction for a product provider to ‘facilitate’ the payment of adviser charges. Easy.

Sustainable?

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The Honister debacle has yet again highlighted the folly of traditional networks’ recruitment practices. In an attempt to staunch the loss of advisers that they always experience and which this year is likely to be worse than ever, the big networks have fallen over themselves to offer golden hellos, discounted rates and the usual cocktail of (to be broken) promises.

I am amazed that loss making businesses still believe that the route to profitability is to attract more customers by cutting prices and offering incentives. Or is it simply desperation driven by the scale ambitions of their provider owners? Or is it perhaps that they see an opportunity to corral more advisers into their multi-ties?

Whatever the justification, advisers should be very wary.