The value of a solid due diligence file has never been more evident than in recent times. Expectations on advisers to carry out detailed analysis of investment options, protection clauses and the financial stability of providers place a major burden on time and resources, not to mention the care and skill needed to match the right solution to a client’s needs.
Regulatory feedback tells us that one size cannot fit all. While quantitative research has a key role to play, qualitative considerations cannot be overlooked in the quest to meet client expectations.
The general consensus is that independence in the new RDR world will require advisers to consider a wider range of investment solutions to maintain the independent tag.
This poses a variety of challenges, from an adviser’s ability adequately to resource this important discipline through to handling new or changing perspectives in specific product areas such as investments.
It is not just the IFA who is faced with difficulties.Many think the move to restricted advice will overcome these complexities but the reality is unlikely to be that simple.
It is with issues such as this in mind that we need to re-examine the services traditionally provided by research teams. A research team should have a real understanding of both the client and adviser journey and be able to engage with the business model selected by the adviser, whether that is independent, restricted or a combination.
Research must be a two-way communication. Only by listening to the needs of clients and advisers can research be fit for purpose. As a guide, a good quality research proposition should offer the following:
1: Recommended list/panel provision – using specific criteria across the widest product range in order to assist the adviser in building the right solution for clients. It must be independent of provider influence and transparent in its construction.
2: Fund ratings – both risk and qualitative. Without qualitative analysis, can advisers be assured that the fund will do as expected?
3: Intelligent “off-panel” services – there will always be products that cannot be fashioned into a panel per-se and a good research team must provide answers for such enquiries.
4: Risk placement services – to help advisers find the right underwriter or life insurer.
5: RDR newsflash services – a short-term service. As we get closer to the switchover, many products will fall by the wayside and advisers need to be able to review the old and its intended replacement in order to decide what will and what will not work for their clients.
6: Guidance on the interplay between different investment types -This is particularly important for advisers who have not yet ventured into some of the areas that the regulator has flagged for inclusion under the independence banner in 2013.
7: Full financial strength due diligence on potential product and wrapper providers.
8: Trust services – often left out of research is the position around taxation and trusts. However, this interplay can be a vital feature in creating the right solution for a particular client.
This is just a flavour of some of the issues that research teams need to address and advisers will increasingly be looking for in the future.
To achieve this, research teams will require significant resourcing to enable them to provide the right service to individual advisers. Importantly, these research experts need to have the experience, qualifications and knowledge necessary to deliver high quality analysis and guidance.
For the independent adviser, this means the ability to cover the diverse marketplace and to have the appropriate solutions for their clients’ needs. For the restricted adviser, it means the comparison of bespoke products and investments.
The risk is even bigger for larger firms with multiple advisers, who need to have the right level of control and influence over their advisers without restricting their ability to service clients’ needs.
Nick Kelly, Managing director, distribution, Sesame Bankhall Group