In the last six months, “robo advice” has become a genuine contender in the personal investing landscape. But lurking in the shadows is a much bigger threat to IFAs’ future…..and that’s our collective failure to reproduce. I’ve been monitoring the robo advice space for nearly eight years now. Until now, it was hype, theory and...
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...
When the defunct FSA proposed details of the adviser charging regime, there were rightly howls of horror from IFAs about the potential for vertically integrated firms to offer advice at an artificially low price.
Fortunately the FSA were clear that their rules required distribution arms of vertically integrated firms to make a profit. One of the consequences of this approach was the demise of the provider backed bancassurance sales teams who simply could not deliver advice at a sensible economic cost. Axa calculated that their advice charge for single premiums would need to be over 6% in order to break even.
But the biggest, and some might argue ugliest, sales force of all seems to have cracked that particular problem.
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.
With IRESS paying £220m for Avelo, HgCapital investing in Intelliflo and iPipeline buying Assureweb, it appears that the prospects for the adviser market are very bright.
But what lessons can advisers learn from this?
Technology firms seek markets where they believe that there will be growth, either in the size of the market or the use of technology.
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.
With Royal London’s announcement that they are setting up a Direct to Consumer business, there will be advisers who will interpret this as the thin end of the wedge and the start of a relentless march towards a 21st century direct sales force.
But does that fear stand up to scrutiny? The last “old” direct sales force disappeared when CIS decided that they could no longer sustain the losses which arose from their distribution model. Over the last 20 years, all insurers have been forced to conclude that a traditional sales team selling single brand insurance products via a face to face sales process carries too much cost and regulatory risk.
So, has RDR changed that calculation? Will the new model market allow insurers to launch new face to face propositions which allow them to make a profit?
One of the highlights for me of working for a product provider is the opportunity to talk to and learn from really high quality advisers. I had the privilege to attend an invitation-only summit last year where the advisers present were absolutely at the top of their game when it came to retirement income.
So you can imagine my surprise when, in one of our interactive sessions, these same advisers told us they believe one of the greatest risks clients face at retirement is lack of adviser knowledge. Experts need to admit when they feel like novices in order to reduce this risk and this potentially endangers the adviser’s relationship with their clients.
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.
(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.