It seems to be generally accepted that an unintended consequence of the retail distribution review will be a significant and potentially damaging drop in the availability of financial advice to the general public.
As banks realise that setting high targets to sales forces, earning large initial commissions and then paying most of it back through complaints is not a sustainable business model, one by one they are deciding this business is not for them.
At the same time, IFAs are moving (being driven?) to a relationship based advice model, which requires investment in both themselves and the client. Anecdotal evidence would suggest a significant number of IFAs have left or are about to leave the industry.
So, does this mean there is a reducing need for financial advice? With an ageing population, increasing debt and ever increasing importance of pensions and savings, good financial advice has never been more important. This would be further evidenced by the proliferation of websites such as This is Money.
Ah. The Daily Mail’s online source of financial advice. At a time when the general public are increasingly less well served for financial planning advice, the existence of websites such as This is Money, providing no nonsense, simple advice to the general public, should be welcomed.
Should be. On the 9 October, This is Money ran an article with the headline The Rise of the DIY Investor: Millions plan to drop their financial adviser when upfront costs rocket next year. The article went on to extol the virtues of Axa Wealth’s new direct-to-customer service.
To my knowledge no-one has suggested advisers’ costs are going to rocket upwards, indeed the pressure is precisely the opposite. It is the method of payment that may be changing, not the amounts.
Personally, I welcome the idea of direct-to-customer advice. For all its faults, there would be millions of people without life assurance if it was not for life assurance salesman, or upfront commission. If an organisation can provide professional advice coupled with the selling of an appropriate produce, not only would I welcome it, but my company would actually refer clients to it who are not suitable for our advice model.
It is essential that all parts of the industry work together. As the comments below the article prove, the general public is only too happy to have preconceptions of financial advice confirmed to them. This does nobody any good.
Better that we all promote financial advice and increase the size of the pie than argue about who gets the biggest slice.
I would therefore call upon This is Money to print a counter article to the one mentioned above, promoting financial advice in general and pointing its readers to the most appropriate source for their circumstances.
Chris Budd is managing director of Ovation Finance