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BBA set to review ailing bank advice market


The British Bankers’ Association is launching a review of bank advice business models as concerns mount that people with small funds will not be able to access financial advice.

The future of mass market advice has been called in to question after Axa closed its bancassurance arm last week. The provider said it would have had to charge an advice fee of at least 6 per cent in order to be profitable.

Axa’s announcement followed Santander’s decision to pull out of advice in March. Other major banks such as Barclays and HSBC will only offer advice to people with assets above a minimum threshold.

The BBA plans to review the bank advice market in an effort to devise a mass market model which can be delivered more cheaply.

BBA executive director of external affairs Paul Stephenson says: “The challenge the RDR poses is that we will see advice being pulled out of the mass market and that is what appears to be happening.

“There is a challenge for the industry to look at how the costs can be reduced in providing some of these services so that we can still have a mass market for advice.”

He adds: “There may be better ways to segment clients or reduce back-office costs to produce a more affordable advice proposition. It is a challenge and it will take a lot of work but that is where we want to get to.”

One of the major problems for banks is the requirement for the advice business to be profitable in its own right.

Ernst & Young global insurance leader Shaun Crawford does not believe bank advice can be revived and expects the RDR to push consumers to self-serve online.

He says: “A lot of the business advisers have sold over the years has been commission-driven.

“The problem is the average bank customer thinks that banking is free, so the transformation of a bank adviser to fees is very difficult.

“Protection sales will continue because commission is still allowed but I cannot see how banks can advise on things like savings and investments.

“We will increasingly see people with more limited funds self-serving online rather than seeking advice from their bank.”

Legal & General remains the dominant presence in the building society advice market having secured tie-ups with 87 per cent of the market. The provider remains bullish about the future of the model.

An L&G spokesman says: “The post-RDR flow of business we have seen through our tie-ups is very strong and we remain committed to that offering.

“We charge 3 per cent up front and 0.65 per cent ongoing and that is a level of advice charge which customer feedback shows consumers are happy with and is, in our view, commercially sustainable.”

Labour MP and Treasury select committee member George Mudie warns that customers could lose out if they are unable to get advice from their bank or building society.

He says: “The problem is, if people cannot access good-quality financial advice, they might buy the wrong type of product or invest in something with very high charges.

“There was always a risk with the RDR that it would lead to a removal of advice for ordinary people in the community and it is happening.”

However, not everyone believes the disappearance of bank advice is necessarily a bad thing for investors. 

Syndaxi Chartered Financial Planners managing director Robert Reid says: “The banks were alright when they were able to hide the charges but that clearly is not as easy post-RDR. Transparency does not work for them.

“You have to question whether some of the advice people got from banks in the past was worth paying for. I do not think people should just get advice for the sake of it. It has to have a value to it.”


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There are 17 comments at the moment, we would love to hear your opinion too.

  1. “The British Bankers’ Association is launching a review of bank advice business models as concerns mount that people with small funds will not be able to access financial advice”.

    I think you are a bit late chaps. What have you been doing for the last 4 years?

  2. Things are getting properly out of control.
    I watched a video of the future of Fincial Services yesterday where Marin Wheatley was speaking about how it was hard for providers to use “buyer beware” and “caveat emptor” to remove responsibility for the purchase. The reason he said it was hard for these justifications is because consumers are thick as champ. He said consumers don’t understand the products and don’t understand what they are buying. He knows this because (and I quote) “….. when 50% of consumers don’t even understand what 50% means.”
    So let’s look at this. RDR IS driving more and more to self serve so half of the purchases made could be wrong for the clients because they make bad decisions due to them being thick. They need advice but the RDR is reducing the numbers of advisers and stopping those who need advice the most from getting it. End result? More and more bad outcomes for consumers who will have NO recourse. It is a ridiculous situation to find our industry in and it is getting worse with more and more leaving the advice market.
    The BBA can review all they want but until the FCA dramatically reduces regulatory cost of doing business they are beating their heads off a brick wall. Reducing operating costs and back office costs have already been done in the past by banks and as they cannot cross-subsidise various parts of their business it is a total non-starter.
    Make no mistake, The RDR is final nail in the coffin of the advice industry as a whole. Over the next couple of years there are going to be networks who find they can’t make a reasonable profit and they too will go to the wall, then the DA firms will follow suit. Those of you who think anything different are deluding yourselves.

  3. Horse, stable door…… etc

  4. AVIVA were one of the more reputable companies in our business. This is a sad day for the public and the advisors involved.

  5. @ Marty

    I prefer to stay positive for my future as an adviser. I think the next 12 months are going to be interesting for big and small companies alike but i refuse to believe that IFA’s will be forced out. Joe Public will always need some level of advice.
    However, something has to change. This is either how we as an industry give advice in order to cope with the post RDR world or it will be RDR itself. I personally hope that it is RDR itself that changes. I agree with the sentiments of RDR but the application has been a disaster. Hopefully more voices such as the BBA joining forces and complaining to the FCA about RDR and it’s consequences will result in some ammendments in the future (the near future at that).

    Anyone with any idea about how Joe Public works will know that the removal of mass market advice is bad for the public. When they find out their bank doesn’t give advice they wont go looking for an IFA they will do nothing. That is what RDR is creating.

    Just my opinion as usual.

  6. This has happened in just 4 bloody months !

    Doesn’t say a lot about all the exhaustive research the regulator (and some providers/banks) did about the impact of RDR – some of these people should be out the door in the same way as some of the advisory staff who have lost their jobs as a result of this complete train wreck ! I would strongly urge anyone to have a look at the unedited version of Sants and Nicholl at the TSC and just see how farcical they were.

    I would love to know how many jobs have been affected by the RDR – because I am bloody sure that if it was any other industry there would be uproar !

    Oh and lets not forget the poor old punter – he’s having it away now isn’t he !

    All of this was predicted by people who actually know, the ones that don’t run the industry – its bloody catastrophic !

    There needs to be a u turn and mighty quick !

  7. I don’t see the problem with the mass market. It’ll simply be filled with lots of lovely new providers offering free pens / piggy banks / widgets etc if you buy their fantastic “even makes the tea” product.

    Job done, I think…….

  8. Alistair Paterson 26th April 2013 at 12:21 pm

    @Marty 10.40am, you are 100% correct.

    The mass advice industry is gubbed. There is no way back, not without scrapping Hector’s Folly and that ain’t going to happen with so many cushy numbers still on the go at the revamped FSA / FCA.

    I am so sad that, as usual, it is ordinary working men and women who are being left holding the baby, left to fend for themselves, as the super rich and wealthy successfully lobbied their way to this utter mess of legislation through their friends in the compliant media. They are presently lining their pockets with glee as ordinary people are left hoping they make the right guess with their online cheapy financial product lottery.

    I really don’t like what has become of this country.

  9. Where were all these politicians with their concerns about RDR when the industry was pointing out the flaws?

  10. When I was with Sun Life of Canada in the 80s, the Senior Vice President, Richard Baker told the industry that if they didn’t set up self regulation along the lines of the BMA or Law Society then the government would do it for them. They didn’t do anything then, and appear to be surprised at the outcome now. Glad I got out last year.(at the age of 70.)

  11. How often do we see this, its not until the planes, trains and automobiles start to crash laying to waste peoples lives, that some jumped up arse wipe spouts hey we need to have a look at this and REVIEW ? hold on a sec you like us have know, been warned, sent letters etc etc etc just get on and sort this bloody mess out and be done with it so we can all get on with our jobs and lives before we are all laid victim to what is now as RD “bloody” R.

  12. So the inevitable visit to the OFT claiming restriction of trade gets closer – I thought it might be a provider perhaps it will be the BBA ?

    In my wildest dreams I didn’t think this would happen in 4 months – I thought about September this year back in 2012.

    Marty @ 10.40 I think you’ve just about nailed it

    The politicians and FSA should hang their heads in shame and get shot of a few of those that pushed this thing through against every shred of evidence and the numerous warnings given to them. The FCA has a perfect opportunity to blame the previous incumbent of Canary Wharf when the OFT tell them to do something about it !

  13. It is perfectly clear that the RDR has failed.

    The FCA, Treasury and other interested parties now need to reflect (quickly) on the damage already done and currently being done to the infrastructure of the industry.

    I cannot imagine how they could have caused more damage if they had had a mind to.

    There will come a point where the damage cannot be undone and we may be approaching that point rather quickly.

    FCA, WAKE UP. Look at what is happening. Are you blind to this?

  14. I seem to recall Mark Hoban MP (remember that twit) recounting the fact that his mum got ‘good advice’ from a bank and in his opinion the banks would continue to offer advice to the ‘masses’ his mum and the masses might struggle a bit now.

    Still he wont pay any price for getting it entirely wrong – isn’t he something to do with employment now ? – how very apt given that all the ex bank advisers and support staff are down the dole offer as we speak !!

  15. AXA and Aviva stop, but Nationwide/L&G and SJP seem to be enjoying things post RDR (I appreciate that SJP are not bancassurers). Is this the fault of RDR or bad management/strategy?

  16. Very good point Marty, Nick Wardle, you say “hope” & “hopefully” Unfortunatly the saying goes, hope is for the underprivileged and unemployed! Exactly what PDR is proving a resounding success at.
    If I were you I would take “hope” out of your business plan

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