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Depolarisation edge: Stephen Ingledew

The term multi-tie has no real meaning in the current world of financial advice – it is like referring to a sixpence in a post-decimalisation world – so can we stop using the term as it certainly does not help consumers.

Are you ready for what some people are
calling the biggest regulatory change in financial services
distribution since A-Day in April 1988?For those of us who were
advisers in 1988, the new world represents a major change in how we
provide financial advice to customers – or is it?In a world where
three-quarters of people do not take financial advice on their
retirement and most people spend longer planning their annual holiday
than their finances, are we missing the point?Much has been written
about depolarisation and what it means for the adviser and consumer
and not surprisingly, there is a lot of misunderstanding. This has
not been helped by the fact that we are still holding on to old
language which is no longer appropriate to the current world we live
in.

For example, the term multi-tie has no real meaning in the current
world of financial advice. In fact, its like referring to a sixpence
in a post-decimalisation world. So can we stop using the term
multi-tie as it certainly does not help consumers understand what we
do as advisers?What then is the change seeking to achieve and is it
just change for changes sake? Well, research has repeatedly shown
that customers did not understand the way in which financial advisers
are regulated, as reflected by the fact that so few people seek
financial advice at key life stages. How then will depolarisation
change this and what does the regulatory change really mean? Let’s go
back to basics and consider our role as advisers.

The advice process starts with gathering hard and soft information
about the customer to assess their financial position and identify
their needs and objectives, both financial and non-financial.

The next stage is to agree these needs and objectives with the
customer and prioritise them. Only then can solutions such as
protection, asset accumulation or tax planning be recommended and
plans agreed with the customer.

Depolarisation does not affect any part of this advice process, it
only affects the end of the process in recommending a product
provider which can offer the product solution to meet the customer’s
needs.

For 16 years, we have selected products from either the whole market
(in theory) or from just one provider.

The new “liberalised” world of depolarisation mean this either/or
approach in selecting an insurance or investment company falls away.

The post-depolarisation world will allow a spectrum of choices for
the advisers and advisory firms in selecting a product provider for a
customer.

At one end of the spectrum will be a choice of just one pro-vider and
at the other end, advisers will be able to choose from the whole
range of providers.

In between these two extremes, the new rules will result in a huge
number of different possibilities in how a provider is selected for a
specific customer. How providers are selected and where advisers
decide to sit in this spectrum will depend on a number of factors, in
particular, what type of customer the adviser is offering their
services to and the nature of their financial needs.

Therefore, when considering what depolarisation really means to you
and your customers, it is important to note that other than the new
disclosure requirements (menu), the process of giving customers
advice and selecting the most suitable product solution does not have
to change.

It is only the method of choosing a product company which can change
if we want it to. Remember, the new liberalised environment is not
forcing advisers or customers into a straitjacket, unlike the
previous regime.

For the majority of customers, research clearly shows that customers
want some choice but not unlimited choice when choosing a provider.

If faced with too many opt-ions, people become confused and
disinterested. For this reason, most advisers today and in the future
will adopt a “selected choice” approach.

The selected choice app-roach will involve the advice firm narrowing
down the selection of providers to a selection of best breed products.

One of the real benefits to advisers of the new regime will be more
focus on the advice element of our roles and less on provider
selection. We have been criticised in thepast for spending too much
time on provider selection and not enough on knowing our clients.

The new environment enables us to demonstrate that advice is the real focus.

The new regime means more choice, more access and more cost
transparency for the consumer and this can only be a good thing.

Stephen Ingledew is commercial director at Barclays Financial
Planning

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