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Categories:Advisers,Regulation

Lloyds to split its bank advice arm for RDR

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Lloyds Banking Group is preparing to revamp its direct-advice arm in preparation for the RDR by splitting its offering between basic protection advice and a “financial planning” service.

Lloyds currently operates a single-tier advice team offering investment and protection products across its branch network, which includes Lloyds TSB, Halifax and Bank of Scotland.

Lloyds will create two types of branch-based advisers. Financial consultants will work as protection specialists while a second group will offer “wider financial planning advice”.

Lloyds declined to disclose the current size of its branch adviser network but under the new structure the number of advisers is expected to grow.

It says that no decisions have yet been taken over how to charge customers for its financial planning service.

Last year, Ernst & Young suggested banks would have to charge clients £200 an hour just to cover costs after the RDR.

A Lloyds spokesman says: “Customers require advice and support to understand and make decisions about their financial future and we are very well placed to take advantage of the changes in the financial advice landscape being brought about by the RDR.

“As the IFA sector moves up market, there will be significant opportunities for bancassurers to provide advice through their high-street branch network.”

Last year Barclays closed its advice arm while HSBC cut 460 “financial planning managers” due to the RDR.

Tower Hill Associates director John Lang says: “I would question Lloyds’ definition of financial planning. It should not be dressing the service up as financial planning if ultimately that is not what it is.”

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Readers' comments (10)

  • A cinical manouvre to maximise profits at the expense of joe public. Carry on Regardless seems to be their watchword.

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  • "Lloyds declined to disclose the current size of its branch adviser network but under the new structure the number of advisers is expected to grow".

    And yet this is the bank that's supposed to be selling off 630 branches?

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  • Sadly, a direct result of regulation. Protection, investment, generic advice cannot be segregated but this is the negative effect of regulation. Huge profits on protection sales without doing the necessary work to ensure appropriate advice is given. How many of these protection products will have the appropriate trust in place? Or have exclusions that the client is unaware of...
    Lloyds tried to sell us PPI many years ago and the employee was most aggressive when we said no. An unpleasant experience. A leopard does not change its spots.

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  • As John Lang suggests, tied or multi-tied agents, with only a very limited roster of products at their disposal, cannot possibly offer a (proper) financial planning service. Tied and multi-tied agents flog products, very often manipulating the client's circumstances and objectives, as recorded on their FactFind, in such a way as to suit the product they want to sell them. That's not financial planning, any more than Towry Law is an independent financial advisory firm.

    Yet, as ever, the FSA appears to be oblivious to such patent misrepresentation of status, preferring instead to turn the industry inside out and upside down by forging relentlessly ahead with its RDR, the costs of which are already nudging towards 3½ times its original grossly (and probably quite deliberately) understated estimate of £600m.

    If the TSC had any powers at all, it would have ordered the FSA to go back to Old Kent Road and rethink the entire proposition from scratch. But sadly the TSC has no powers, so the FSA just steams ahead at full throttle, regardless of anything that anyone else might have to say on the matter.

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  • You have to hand it to the banks mind, they have played a blinder. Joe Public really doesn't understand any of this and will be horribly confused post RDR. The banks will clean up, but at least they will start recruiting again so there will be jobs for all the IFAs whose business models collapse. For those that can't face working in a bank, the claims chaser industry is growing very quickly, so perhaps a nice job there would suit. Fancy regulation instead? No probs, the FCA is expected to become a big old beast given time, so the future is looking really rosy.

    Unless you are a professional or a client that is.

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  • Yet another RDR dividend......

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  • Another interesting blog in that it demonstrates yet again the lack of understanding of the market engendered by regulation. So many people are getting high and mighty about the advice aspect, including the FSA, that the dynamics of the market are totally lost on them.
    Advisers did not exist prior to their invention in the 1986 Act. Before that most independents in the business considered themselves brokers selling suitable products (you can debate amongst yourselves whether this was suitable for the client or the broker's wallet). Advice, if provided, was generally given in order to improve the sale, and was rarely an end in itself.
    If people had loads of money they did not go to a broker - they went to an accountant or solicitor and got advice, and sometimes a product, that quite often was a recommendation to see their friend the Stockbroker. The average client went to a broker to get an endowment, pension, or protection, and got an endowment, pension or protection. End of story.
    Transforming these brokers into advisers in the mid 1980s caused merriment and growing confusion. Most did not offer financial advice; they offered product advice. But because they were now called Advisers thought that they had to offer advice. The change came from above, not from the market place.
    As people got richer, more people wanted product advice, and some needed to go a little further. Out of that need the range of products grew which more than justified the need to seek a little specialist advice. But it was still mainly product orientated. What gave good growth, good income, good protection.
    The current sanctimonious concentration on "advice" only really started to grow around the turn of the century, until now it has become the elusive Holy Grail. But actually the general public mainly want advice on suitable products. Financial advice is about as useful to some people as penicillin is for curing a headache (possibly caused by having to listen to an adviser!).
    So it quite possible that Lloyds understands the dynamics of the market far better than the FSA, and IFAs who adore the status ideas of the FSA but not the rules that put the ideas in place. This could be that intuitively they understand that the current market model does not fit the market, but are unwilling to give up the hope of high status. Lloyds understands the market, and the profit centre and doesn't give a monkey's about the status.
    Complain all you will but Towry make profits, SJP make profits, Lloyds make profits. And that cannot happen if people do not go to them. There has been 10 years of negative publicity for banks, and similar for the other two companies mentioned. There are plenty of complaints that end up with the FOS on all three. Yet people still go to them and stay with them and pay their charges - relatively happily. I wonder if it may be that they are, in the main, meeting the needs of their clients.
    Instead of merely shouting at them try to work out why the general public will use them instead of going to highly qualified, ethical and competitively charging IFAs. It could be that the market is far more complex than the FSA, and IFAs, comprehend.
    It is possible that IFAs are now so engrossed in their fight for status that they also have forgotten what the market is about. I would suggest that in at least 70% of cases if is about providing decent, professional advice about a required product; nothing more and nothing less. Lloyds may be about to give them that. The advice part is a sanctimonious illusion.

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  • Well said Glen Mckeown. Every regulation, guideline or rule is designed with the criminal or unscrupulous in mind. What happens in reality ? The only ones who attempt to obey the new rule are the honest ones and the sharks just continue finding ways around it. What happened to 'buyer beware' ? A smart regulator would cut the red tape and free the majority of honest players in the market so that the rogues can be eliminated by competition.

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  • I actually work for the bank and am fully qualified rdr adviser for over 10years who actually prefers selling protection and am now a financial consultant. There is no compromise on the level of advice ordinary customers are receiving and the bank has been innovative enough to seize an opportunity to provide simple advice to ordinary clients whilst still giving higher net worth clients what they need.policies written by consultants are under trust so no compromise there.you are all losing the plot. Which young family starting out needs to pay 200 quid to receive that advice.not everyone is savy enough to work out how much cover they need and to do it themselves online. I'm very happy with my employer and no doubt the profits will be rolling back in soon.everyone is a winner including the taxpayer.

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  • Oh dear, another brain-washed bank employee who's been cleverly sold the idea that retail banks can offer financial advice. As a 'Financial Consultant' what financially are you going to actually be consulting on? they should stick to current accounts and lending and leave the rest to real advisers who can offer people what they need.

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