I first encountered the word democratisation in Chris Anderson’s seminal The Long Tail a few years ago. Essentially a narrative about the economics of abundant supply, the book looks at the impact of the internet on markets where purchasing bias may be rife. The essential hypothesis is that we can now buy what we like and should not allow ourselves to be manipulated by retailers or other distributors.
Whatever else the RDR has achieved, it has catalysed the rapidly developing trend for advisers to be economically aligned to their clients rather than providers.
The product is now your advice. That is a pretty seismic shift and one which has the very positive side effect of putting you in control. The client solution is now yours to build and rather than be remunerated as a life company, a fund manager or a legacy platform may decree for distributing their stuff, you and your client can now agree the fair price for assembling the components that will deliver their financial objectives. After 30 years or so of arrogant encouragement to sell one company’s products over those of another, you and your clients are now calling the shots. Every single one.
Unless that is, you are using a platform which seeks to introduce bias into your advice by offering so-called special terms on the funds of certain “preferred” asset management groups. Whether dressed up as having “conducted extensive research” or “scale allows us to negotiate better terms”, the clear objective is to entice you to direct your clients’ assets in such a way that the platform makes additional margin on those assets. Whether that is due to a higher platform charge or a kickback from the fund manager seems barely relevant.
In the most absurd example, one rapidly emerging wrap is offering the platform for free if you invest the underlying assets in the funds of the platform operator’s parent company. The story appears to be that you can have the platform for free if you are willing to cast aside your own fund views. A cynical observer might consider this a ploy to gather assets ahead of the RDR, secure in the knowledge that whatever the re-registration project delivers, it will some years before moving clients en masse between platforms will be straightforward.
On a similar theme, I have always had a huge issue with long-time broker consultants morphing into business consultants and telling IFAs how to run their businesses. While some have operated on the “other side”, there are many more who have enjoyed the fruits of your labour and given little in return. Surely it is far better to seek guidance from your peers who have lived it, than from salaried, reconstituted product salespeople?
You are finally in control. Don’t dilute your opportunity by supporting platforms which aim to manipulate you. Love democratisation. Fear the honeytrap.
David Ferguson is the chief executive of Nucleus