Over the past few weeks, there have been some interesting moves by bigger players in the advice market. Barclays and Co-op are pulling out of mainstream face-to-face advice, Lloyds are talking to the regulator about a simplified model and Marks & Spencer has announced a move into mortgages.
The IFA community tends to dismiss the banks and major brands as serious competitors and, you may say, quite rightly so. Look at the track record – over the past 20 years, they have never accounted for more than 20 per cent of the market by value despite their scale and depth of customer knowledge.
This may be a case of past performance providing a good guide to the future but the advice market is changing and we should acknowledge that the competitive “tectonic plates” may be shifting.
It used to be that major players would follow the same policies and operate in predictable manner. We cannot make that assumption looking to the future. Indeed, the variety of advice models emerging from the bigger players suggests that much thought has gone into the post-RDR world.
What does this mean for IFAs and other advice businesses?
First, we should never dismiss the big competitors because, if they get their offer right, they have the scale to take significant share.
Second, they will be competing on a range of fronts. These include the more traditional “wealth management services”, impressive and user-friendly online operations and streamlined simplified advice more akin to the typical bancassurance model. We should also expect greater variety and creativity in their approaches to adviser charging.
The banks have a lot of issues to deal with and more profitable markets to pursue than financial advice. We should not over-estimate their competitive power after the RDR but it is very important to monitor their activities and not automatically assume that they will be the relatively benign competitors that they have been in the past.
David Shelton is the author of The Business of Advice book and website www.businessofadvice.co.uk