Welcome back from your Easter break. I trust you had a relaxing time off. We here at Money Marketing were pretty chuffed we managed to get our ducks in a row beforehand, and are able to deliver your regular weekly dose of editorial goodness, despite having two fewer days to do it. This week, we take a look at the ever-joyous topic of bank advice for our cover story. Because, like it or not, the cycle of bancassurance going in and out of fashion is very much still in action, both in the UK and Australia.
Previously, you only really had two routes to see your bank adviser: walk into a branch or wait for them to knock on your door. The recent Lloyds-Schroders financial planning joint venture has changed the rules of the game. It has turned the client acquisition process upside down.
Now, you could conceivably get to the bank’s financial planners through any IFA at the Best Practice Network, chartered planning firm Aspect8, any planner that uses the Fusion Wealth technology for either platform or discretionary fund management, RSMR for research, Lloyds’ existing private client advisers, Nutmeg, Schroders, or its DFM Cazenove, or even Scottish Widows’ workplace business. That is a monster amount of potential referrals. But Lloyds is not alone here. Modern banking practices aren’t just in the money lending or corporate advisory businesses any more.
Even the “great vampire squid” Goldman Sachs, which traditionally excelled at one thing and one thing only – advising on gargantuan deals – has started eyeing up the retail savings market with the launch of its Marcus account. But is there any compelling reason advisers would join a bank model specifically, when so many other national IFA firms, consolidators and networks are knocking louder at their door? Let’s say the bank offers a sweet remuneration deal to new joiners. It then runs the risk of offering inappropriate incentives to advisers, which was exactly what did for Australian lenders in the recent Royal Commission inquiry.
To make the kind of margin the banks get from traditional borrower/lender spreads, Lloyds and Schroders might have to leverage that value chain pretty aggressively. But again, the vertically integrated nature of Australian bancassurance models was what tripped those guys up with regulators. More generally, there is no evidence (yet) of a sweeping willingness to jump the independent ship in favour of restricted status.
Take FCA data from 2016, which showed independent advice accounted for 61 per cent of revenue from adviser charges. That was down only 1 percentage point from the previous year. By number of firms, 83 per cent were still classified as independent. My impression is our cycle is just running a few years behind our Antipodean cousins’ when it comes to bank advice. Things are different this time round. But they may end up in the same mess.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1