The retail distribution review has divided opinion among advisers and planners, passives and actives, wraps and supermarkets, restricted and whole of market and those for and those against. But is now the time to stop and regroup and focus on the bigger prize – making the nation wealthier by providing it with advice in all its many forms?
Many advisers will remember the good old/bad old days of polarisation when the creation of tied and independent advisers first set one tribe against the other.
Conspiracy theorists might be tempted to think the FSA has adopted a divide and conquer strategy with the introduction of the RDR.
The strategy would be to create lots of splinter groups with no single voice or consensus and allow the RDR to pass through while these different factions spend their time arguing.
There are clear advocates of the RDR – some business owners have been moving to a fee basis for some time. Others have taken advanced qualifications as a route to more professional advice.
Others argue this is fine for high-net-worth customers who are prepared to and have the means to pay professional fees. But how does that work for the mass market or those on lower incomes who still need advice, protection products (currently outside the RDR), pension planning and more?
Is this just the old debate about products being sold, not bought, returning in a new guise?
Some advisers have settled on passive funds based on the logic that markets are efficient and that investors would be best to collect the equity risk premium in as low-cost a way as possible. Others contend that investment advice is a core part of their offering, others that outsourcing to investment specialists is the right answer.
Debate over restricted and whole of market is yet to really get going. The FSA has started the debate about the ability of adviser networks to police and monitor members of all types – will this force a move to restricted advice? Does it matter? Can an adviser with a small range of products still add value to a customer and can the recommended product be the best?
IFAs are clear that the banks have been the culprits – just look at the record of fines and Financial Ombudsman Service complaints, but many hundreds of thousands, even millions of customers are content to be sold simple, reliable products (most of the time) from a brand with a presence in the high street. The ease of use and security of the brand is compelling but when the adviser is the agent of the provider can this be advice?
The emerging platform market has created huge debate – lots of heat without much light some would say.
So much noise from an industry that is so young – wrap v supermarket, bundled v unbundled, transparent v. opaque; and cost v value.
Will platforms rise to take on the bulk of adviser assets? Is this just the dawn of a new form of electronic life company or do they add value? Is the price model of platforms at the right level or is it too high for what is a simple custody function? Can one platform be right for all an adviser’s customers?
The market is alive with rumours of new platform entrants, new pricing models and an impending price war as platforms compete for adviser assets. Already, some have been and gone. Many advisers are yet to be convinced that a platform offers any value for customers.
At least the seemingly simple requirement for in specie re-registration has been accelerated by the RDR.
Advisers, resilient to the core, are exploring new business models. The substantial value that builds up with assets under advice or assets under management is leading to further innovation from advisers.
Some business strategies are to acquire those looking to exit before the RDR and other advisers are looking at introducer status. Adviser firms launching funds to recapture asset manager value, networks with their own fund ranges, adviser groups with equity shares in platforms, platforms owned by advisers, advisers building equity stakes in fund managers – innovation, it seems, knows no bounds.
But with all this turmoil, debate, polarisation of view and complexity, we perhaps run the risk of missing out the most important thing of all – the customer.
People are saving less and living longer. Final-salary schemes, with their healthy contribution rates, are being replaced by auto-enrolment with a contribution rate of around 8 per cent. Debts are rising, divorce is growing. Taxes are rising and inflation is high and interest rates are low. Education bills are spiralling, property values teetering and complexity rising.
Customers are confused by the product complexity, by the choices they have and the demands on their cash.
The need for advice and planning is obviously great at the moment.
There are many different business models that can offer better value than the customer doing nothing. A long-term relationship based on detailed cashflow modelling combined with the dreams and values of the customer is perhaps the pinnacle but even a one-off consultation or occasional financial MOT can be valuable.
The needs of the nation are only going to grow- both for accumulation and de-accumulation.
Perhaps now is the time to put the polarising factions of the RDR behind us and focus our efforts on getting advice and the universal awareness of the value of advice to the whole nation.