After failing to find a buyer, Friends Life has announced the possibility of winding down the Sesame network. Concerns over historic liabilities and a high-profile conversion to restricted-only advice may have hammered the nail in that particular coffin. Conversely, Old Mutual has purchased Intrinsic and Skandia has been added to the network’s restricted panel. One can only assume this acquisition was a strategic attempt to buy distribution.
I cannot see that the independent arm of Intrinsic will survive as the firm’s core proposition is already restricted and therefore it seems logical that Intrinsic multi-tied advisers would not have the same emotional attachment to independence that Sesame advisers had. Restricted advisers are clearly a more rewarding route for Old Mutual to distribute Skandia and other Old Mutual group products.
Last week, St James’s Place entered the FTSE 100. Irrespective of your views as to its proposition, it has been one of the great winners of the RDR.
This year looks like the time to draw a line in the sand and take a position: on one hand, independence, with all the due diligence and increased compliance that this represents, on the other, single-tied restricted, where provider self-interest often comes at the expense of consumer benefit.
Or do you prefer a hybrid approach, anything from a limited range of solutions to whole of market restricted (an artificial allusion to “almost independent” that the FCA has intimated it does not like)?
I think the decision depends on who you ultimately hold allegiance to: A client benefit to a move to restriction could be keener terms, especially on annuities, for example. Prohibition of advice on complex financial products can also lead to better outcomes, particularly where firms are dealing with clients with more simple needs. However, where a firm is restricted due to a wish to peddle more of one provider’s products, it seems hard to see the benefit to the end customer.
The surge in restricted firms means independence is beginning to look like a quaint relic and provider ownership more the norm; Sesame, Origen, Tenet, Openwork and now Intrinsic account for over half of the advisory population.
I am holding myself up for criticism but I would certainly anticipate that sales-focused direct and restricted firms are less likely to focus on long-term cashflow planning, which by its nature tends to be more oriented around a client’s ambitions rather than a product-oriented “need”.
Stung by previous claims, the nature of these firms is to restrict outcomes even where there is clear client detriment – I heard of one restricted network that has a long-term ban on the use of life assurance bonds.
I am not convinced we are returning to a world of door-to-door calls and man from the Pru salespeople but I see a need for independents to specialise and focus on those with more complex requirements.
Restricted firms are uniquely well positioned to offer simplified products, which rightly should be tightly regulated and provided to those with simpler needs. Focusing on more complex requirements does not mean that independents need to offer more complex solutions, but offer a broader range of services, for example, tax planning, cashflow planning, estate and succession management etc.
Like the markets who cater to the discerning shopper, those wanting to be independent will find their services are more valued by those with a greater level of disposal income and more than a low level of assets.
Alistair Cunningham is director of Wingate Financial Planning