Aifa says advisers should seriously consider offering restricted advice but warns it should not be seen as a “soft option”.
The trade body today released a paper, Advice Horizons, looking to help advisers deal with the retail distribution review.
The paper, sponsored by Legal & General, says that while the concept of restricted advice has traditionally not been very popular with IFAs, it could open up new opportunities.
The paper points to the fact restricted advice does not lower the threshold for professionalism or advisory standards and that some commentators are suggesting that the need to offer a range of wrappers is questionable.
The paper says: “Until recently, restricted advice has been viewed with disdain by many IFAs, but there is a growing view that “constraining” a firm’s activities, and in particular its business processes, can generate efficiencies and also open up the opportunities to partner or joint venture with manufacturers and fund management companies – creating new revenue streams.Adopting a restricted advice model is not a soft option and should be given serious consideration as part of a strategic review.”
The paper says independent advice will become a “premium service” which will create new marketing opportunities as well as financial and reputational rewards.
It says: “Clients value the clarity and certainty of the fact that the adviser works on their behalf and, time and again, research proves that it is “independent financial advisers” who are the most trusted group in retail financial services.
“Referrals from solicitors and accountants can be a significant source of new clients for IFAs as other types of advisers cannot have clients referred to them by these professions. For some firms, who deal with professionals, these links are essential to their business success.”
Aifa says many firms may look to offer a restricted service alongside an independent offering, depending on the service needs of their clients.
The paper warns there is still no clear sign of how simplified advice can be delivered and suggests this issue could be parked until the Consumer Protection and Markets Authority is created.
The paper also suggests advisers could look to develop “advisory chambers” with firms retaining brand and ownership but sharing back-office efficiencies.
It says such a relationship could progress so firms provide shared services to clients based on the depth of expertise within their chambers, which could be nationally dispersed.
The paper says: “The “ownership” of the client could be resolved on a formal, contractual basis, or via an informal mechanism based on quality and value of referrals. Of course, larger firms may also use this model as they centralise specialist advice areas in order to ensure quality of advice and hence, lower their risk profile.”
Aifa says these relationships could be extended to create “professional advisory chambers” in association with law firms.