Much has been written about the respon-sibilities advisers have to meet to be able to continue trading following the retail distribution review. A lesser known factor is how the adviser/provider relationship will pan out leading up to 2013 and beyond. This is un-surprising given the advisory focus on platforms but at the same time it is not clear how the bigger life companies will reinvent themselves.
More advisers are migrating away from individual fund-picking towards investment committee, model portfolios or fund of fund approaches. Changes to capital gains tax and the advent of platforms have also hastened the move away from traditional life provider bonds towards more open architecture collective solutions.
In that sense, asset migra-tion is inevitable but IFAs must not hide behind the wrap pro-vider and should clearly artic-ulate their client proposition – the wrap provider should be largely anonymous.
So-called legacy products will also remain a positive choice for some clients and it is important that advisers only recommend moving away from them when it is clearly in the client’s interests. Advisory practices should sustain a healthy dialogue with the traditional product providers, given that the intermediated sector will need a whole variety of solutions.
Even without knowing exactly what shape the providers will be in come January 1, 2013, advisers can still prepare and be best-placed to work with them. Positive engagement is essential and IFAs should not shy away from asking the providers how they intend to face them in future.
Advisers will be looking for a greater array of value-adding propositions from providers. The RDR means clients will increasingly judge advisers by the service they provide. Even if they wish to fund-pick, it is likely they will not have the capacity to do this as a greater proportion of their time will be spent on service provision.
Wrap platforms are geared towards generating efficiency for advisers so they can spend their time providing excellent service. Advisers will likely want providers to fulfil a similar role, which is markedly different from what has happened before.
This new relationship will not simply be based on accepting commission for a product referral but will be much more of a partnership, with the provider offering value-added benefits to bolster advisers’ propositions and ultimately helping them deliver efficiency savings.
While this relationship is working itself out, advisers should be putting agreements in place with their clients to protect existing income streams and should dissuade companies from cancelling agencies or going direct.
These new relationships are yet to be set in stone and advisers should certainly not rely on inertia from either clients or providers to protect their legacy income.
Peter Craddock is group operations director at Perspective Financial Group