As the latest provider to announce plans to expand its financial planning arm, Prudential has caught the eye of the advice market.
Earlier this month the savings giant announced it was recruiting an additional 30 advisers. Speaking to Money Marketing, Prudential Financial Planning chief executive Chris Haines now says this growth is set to continue, with the company looking to hire a further 70 advisers over the next year.
This would boost its network of restricted advisers to more than 350, making it one of the 10 largest advice firms in the UK.
Pru is not the only insurer or asset manager extending its reach into the advice sector and expanding its distribution network. Standard Life, Old Mutual and Aviva have all recently expanded their own advice networks.
But what does a legacy brand with a history of tied advice pinning its colours to the planning mast mean for the profession?
The start of a journey
Haines makes no bones about the growth ambitions for Pru’s advice business. He says: “We want to grow our business. Growth is good. It helps us to achieve economies of scale we otherwise wouldn’t have.”
Haines says the company is aiming to grow its network of restricted advisers – or “partners” as it calls them – by 10 per cent each year. At the same time, he says the company hopes to improve efficiency and adviser productivity by a further 10 per cent year on year.
But these ambitions are tempered with a degree of realism. There will inevitably be years, he says, when such targets are not achievable. “But at the moment do I think this level of growth is possible? The answer is absolutely.”
Haines joined Prudential in 2009. His first role was to build the business case for the savings giant to go back into face-to-face advice, a market it had quit more than a decade earlier.
PFP was launched in 2012 in the wake of the RDR. Haines was clear from the outset this was to be a financial planning service – albeit offering restricted advice – rather than the large salesforce the company ran in the 1980s and 1990s. “The Man from the Pru is still an iconic brand – but the proposition has changed since then,” he says.
He is also keen to stress that the success of PFP does not diminish – or threaten – the company’s commitment to the independent advice sector.
The Man from the Pru is an iconic brand – but the proposition has changed
Haines says: “Prudential’s core route to market remains the intermediated channel and it will continue to be so for the foreseeable future.”
He adds: “It’s important to remember that PFP exists principally to serve the needs of existing Prudential customers, many of whom were sold pensions and other investment products by our antecedents 15 to 25 years ago.”
Haines says Pru has a customer base of around one million. Some 40 per cent of these have personal pensions. Haines says: “These baby boomers are now approaching retirement. Given the complexity and seminal significance of the decisions that have to be made at this point, we wanted to be able to offer some form of advice and guidance to our existing customers.”
However, Haines says “commercial realities” mean they are not in a position to provide advice to all their customers. “We’re delivering advice to the upper end of our customer base. We’ve built our proposition to match, for want of a better term, ‘middle Britain’. Our target market is probably couples within 15 years of retirement with relatively modest household earnings, say, of £40,000 to £50,000.
“They face the challenges we all face when it comes to retirement planning, but they have the means to be able to do something about it .”
Professional Partnerships IFA business consultant Gill Cardy
I simply do not accept that restricted advice is acceptable, particularly if you are paying virtually the same fee. A panel of approved providers is better but still not satisfactory. The point is clients don’t know what they don’t know, so won’t necessarily seek anything better. None of this would be an issue if there were enough advisers advising those of more modest means. This has created a gap, which providers are looking to fill.
Delivering efficiencies and lowering the cost of this advice may in future help PFP extend its reach, and offer planning to those lower down the demographic scale. “Automation and technology will play a part in improving processes,” Haines says. To this end PFP has recently introduced a telephone advice service.
But Haines says: “We are still a long way from end-to-end digital advice. Today’s robo-advisers can’t persuade or reassure customers. A robo-adviser may come up with a brilliant investment plan, but if it’s not acted on it is essentially worthless.”