Three years after it culled its 120-strong team of advisers, Aviva is to restart its face-to-face advice service.
Millions of Aviva’s pension customers will be directed to the field-based advice arm – which will be restricted to Aviva products – at the point of retirement.
Advisers fear the move “muddies the waters” but trade and professional bodies and market experts welcome the launch as helping to fill the advice gap created by the RDR.
They say advisers should not feel threatened by providers entering advice as they are targeting the mass market and not wealthier clients more suited to traditional IFAs.
So, why do firms like Aviva want to offer advice? Does the growth of tied or restricted advisers undermine the aims of the RDR? And will we see the emergence of a national advice brand as insurance giants compete for market share?
Customers need help
Aviva’s tentative step back in to advice was driven by the pensions freedoms, according to client advice director Andy Barton.
He denies the move was prompted by concerns the firm was at risk of inadvertently crossing into advice when providing customers with guidance. In March 2015, Money Marketing revealed the insurer scrapped a telephone guidance team at the eleventh hour for fear it could be considered advice by the FCA.
Barton says: “There has been a noticeable increase in people asking if we can help with advice and up to now we have had to say no.
“Like a lot of organisations when the RDR came in, Aviva did not know what the demand to provide advice would be in the future so we stopped providing it. But in April last year all of a sudden that demand increased again and we are aiming to meet those customer requirements.”
But Apfa director general Chris Hannant says providers are struggling with the line between guidance and advice.
Hannant says: “Lots of companies are concerned about the risk they face of people doing things with their pension assets and then saying they did not understand the consequence. It may be they feel just giving guidance does not let them go as far as they would like.
“While we are supposed to be getting more clarification on the line between guidance and advice it is always difficult for a product provider. The FCA has also said – and I agree – that a product recommendation can be implied.
“So the same words – which might be generic guidance if you were Pension Wise – could very much look like an implied recommendation if you are a product provider. So there’s an extra layer of difficulty for those with product offerings.”
Not Standard Life
Aviva is aiming to have a 20-strong team – drawn from the ranks of providers, banks and advice firms – in place by the end of the year focussed on providing advice at retirement. However, this may be expanded into other areas if there is demand.
Existing relationships with network Tenet and Foster Denovo, where legacy Aviva and Friends Life customers are referred to, will be retained.
The firm says it will only speak to people who do not already have an adviser.
Barton adds Aviva is taking a “different approach” to the likes of Standard Life and Old Mutual Wealth, which are openly acquiring firms into 1825 and Intrinsic respectively. He also distances the firm from comparisons to ‘the man from the Pru’, saying “we wouldn’t make a comparison with what’s gone before”.
Cazalet Consulting recently published a comprehensive report into the growth of product providers expanding into all parts of the financial chain.
Chief executive Ned Cazalet says Aviva’s move has echoes of rival Standard Life’s strategy but with key differences.
He says: “The read across is that Aviva is doing something similar to Standard Life. The other players that are big in the workplace who could follow are the likes of Legal & General, Aegon and Royal London, even though they keep saying they are adviser focused.
“The providers need advisers – not just guiders – because of the huge demand.”
But he adds: “It’s much less straightforward for Aviva. Standard have a bunch of supporting middle England adviser firms with reasonably high-net-worth clients because they are already using the platform. Aviva does not have that heritage, they have some way to go before they step into 1825’s space because they do not have that structure.”
Threat to advisers?
Advisers have greeted Aviva’s move with scepticism. They warn the move takes the industry back to where it was pre-RDR and question the firm’s commitment, noting its history of dipping in and out of the market (see timeline).
Red Circle Financial Planning chartered independent financial planner Darren Cooke says: “Aviva will have a large number customers approaching retirement –now they will be sign-posting this so-called advice option to them, but all they’ll be offered is in-house products and services. I don’t see how this is in the customer’s best interests.
“The RDR was supposed to separate products from advice, this seems to be muddying the waters again.”
But others say the trend is inevitable and advisers should not fear having their lunch eaten.
Personal Finance Society chief executive Keith Richards says: “It is surprising and somewhat premature for some experts to suggest that the re-entry of life companies and robo-advice will lead to the demise of the intermediary advice model, especially as it is likely to result in more consumers recognising immediate or a future need for professional financial planning.
“They are different levels of service which compliment rather than compete, albeit there will always be a degree of overlap.”
Cazalet adds: “I can’t see advisers complaining or seeing this as competition because if they were serving this kind of client they would not be phoning providers asking for help. The pension freedoms, RDR as well as the central banks’ policy of extraordinary financial repressions have created an enormous need for advice.”
Management consultancy EY estimates the value of liquid investible assets held by those between 50 and 70 at around £1trn.
Senior adviser Malcolm Kerr says these kinds of eye-watering sums make is inevitable financial firms will offer advice themselves.
He says: “It’s hardly surprising that institutions have recognised what a hugely important market this is, and are looking to connect with it more directly instead of working through the intermediaries who currently dominate this space.
“This includes asset managers, insurers, and third parties with strong brands outside financial services who might partner with one of those. This must be the largest non-commoditised market in the UK where there isn’t a brand.”
He adds it suits the FCA and Government to have larger players.
He says: “It is not that they don’t trust advisers but institutions are pretty much guaranteed to be around for the duration where as a lot of advice firms are going to change hands and consolidate, which adds complexity and may end up putting a lot of risk into some of them.”
Aviva and advice: A complicated past
March 2012: Aviva rules out offering simplified advice in favour of guidance services
May 2013: Aviva ceases face-to-face investment and protection advice. Coventry Building Society, which has a bancassurance partnership with the insurer, also halts investment advice.
March 2015: Aviva scraps Sesame Bankhall’s investment advice network after its takeover of Friends Life
March 2015: Aviva aborts plans to launch a guidance team
May 2015: Aviva considers selling its stake in advice network Tenet
July 2016: Aviva to launch face-to-face at-retirement advice service
Dennis Hall, managing director of Yellowtail Financial Planning
“Historically providers haven’t always had a good track record when it comes to delivering advice services. It seems profit has sometimes got in the way of delivering good customer service.
“I’d also question Aviva’s commitment to this market. They launched a platform, then pulled it, and are now offering face-to-face advice a few years after exiting this market. This feels like another short-term ‘me too’ decision.”
Tom Kean, director of Thameside Financial Planning
“I am not impressed at all by this move, It’s pretty shabby. I previously quite liked the Aviva brand, but they have definitely gone down in my estimate as a result of this. I think it will be a retrograde step. I am sure they will flag up to their pension savers that this is restricted or tied advice – but how many customers will really understand that?”