George Higginson: Why Sesame network is going ‘whole of market’ restricted


Ten months on from RDR implementation and the FCA’s three-stage RDR thematic review is, quite rightly, focusing attention on how the market is evolving in the new regulatory world and whether it is delivering the improved customer outcomes intended.    

At the recent Institute of Financial Planning conference, the FCA demonstrated a clear direction of travel. In particular, FCA technical specialist Rory Percival said the regulator has been as “clear as it can be” on what true independence means and that “now is time to see if the industry is complying.”

For some advisers, this wind of change will be unsettling, especially for any firms operating under the false impression they can continue as before and still call themselves independent. It serves no-one’s best long-term interests to work under this misapprehension. In fact, it is dangerous to do so and it has led to a false RDR dawn for our profession.

With our view that our operating environment is set to get tougher, we will need to make bold changes to the SBG proposition. But one thing I want to reassure advisers now is, as a group, we are fully committed to supporting independence in the long-term, along with those that choose to adopt new propositions.

It would be wrong for me to set out here exactly how the relaunched SBG proposition will look in 2014. The truth is we have more work to do with advisers in the coming weeks to ensure we offer a business model that serves everyone’s best interests.

But we owe it to members to tell them now we will need to make changes. The costs of controlling and operating an independent appointed representative network – costs that are ultimately passed on to advisers and consumers – mean this is one area we need to address.

Whilst we will maintain support for independence through the group for directly authorised firms, our network in the future will focus on a whole of market basis for investments and pensions, whilst being independent for mortgages and protection. This approach will allow us to control risk and costs, whilst enabling advisers to operate as efficiently as possible and continue to offer broad customer choice.

The changes are about ensuring propositions are correctly labelled. Whilst the independent proposition is clearly defined in regulation for designated investment advisers, “restricted” alternatives vary widely. We are considering a number of options and will update our members in the months ahead.

What is clear is, as a group, we are committed to supporting those that want to continue to operate as IFAs. As a broad based financial services group, we already support over 5,000 IFAs who are directly authorised through our support services provider arm, Bankhall. What is more, we will be investing heavily in Bankhall’s technology in the coming months to help independent advisers continue to deliver the best possible service to their customers. 

While some industry commentators want to position themselves firmly in the “restricted” or “independent” camp, I don’t. Rather than one model being best, I believe a range of propositions have a role in advice firms in the future. It is up to advisers to decide what is best for their customers and their businesses. 

Just as we will need to make some bold changes to our business in the coming months, we know many advisory firms that work with us will also need to make changes to how they operate.

It is imperative advisers are given the time to do this properly for their customers, which is why we are planning to announce more on our plans at our conference in January, with a period of six months for advisers to make decisions and plan for the future.

We are committed to making the journey as painless as possible and will be there to support all firms and advisers – no matter what business model they decide to choose in the future.    

George Higginson is chief executive of Sesame Bankhall Group 



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There are 8 comments at the moment, we would love to hear your opinion too.

  1. The crunch question is: Will Sesame impose its own restricted panel of providers and products or will it allow its members to choose their own? The demands of meeting the FSA/FCA’s criteria for Indy/WoM advice are such that I think most of the other networks will have to follow Sesame’s lead. Whilst many DA IFA’s may believe that they’re meeting all the criteria for Indy/WoM advice, they may get a nasty shock if and when the regulator comes knocking at their door and picks apart a few files in the same way as the networks are picking apart those of their members, leading to non-negotiable (and extremely irksome) instructions that a whole lot more work must be done to render the file compliant.

    Although it took an (unacceptable) age of to’ing and fro’ing to get my new IDD’s agreed and approved, I’ve now gone restricted in terms of my preferred platform and pension provider. Plenty of people I’ve talked to consider that many others will have to follow suit. The only thing that’s holding them back (I suspect) is a natural reluctance to relinquish the term independent in favour of restricted, with all the negative connotations the latter implies.

    In practice, depending on how clearly you explain to clients just why you’ve made the transition (or, as I have done, all but had to), any damage to your credibility may be negligible. I know a few FA’s who went restricted from the word go and they’ve reported no problems at all. It’s certainly done SJP no harm and look at what they offer their customers by comparison with what you’ll still be able to as a restricted WoM FA. The same goes for TL.

    That said, this article sheds no light on just what Sesame’s plans are, in terms of what restricted will mean for Sesame members. In fact, it doesn’t even articulate the reasons for its decision to impose this transition on them all, though I think the reasons aren’t difficult to work out. Members are finding themselves bogged down in endless and acrimonious conflicts with their network’s file checkers (I know I’ve been), from which a switch to restricted status may well afford some merciful relief.

    Then again, was there really any need or likely practical advantage for the FSA to change the definition of Indy/WoM from access to and the ability to advise on all products across the market to a full comparative analysis of them all to justify every and any recommendation? Doubtless the FCA will claim that consumers will know exactly who they’re dealing with and on what terms. BUT, if every restricted FA the length and breadth of the land offers a different proposition (as will surely be the case), whilst the (relatively) few Indy/WoM practitioners still remaining are quoting large, upfront fees (as they’ll have to) for their research and recommendation work, how will any consumer possibly be able to compare one against another? None will, it’s as simple as that. How can they? They’ll have neither the time or the inclination.

    So, far from unifying the advice market, the imposition of these new criteria for Indy/WoM advice and the resulting mass migration to restricted status will result in it [the advice market] becoming more fragmented and disparate then it’s ever been before. Was this the outcome intended or even foreseen by the FSA when formulating and then endlessly embellishing and complicating its grand Utopian RDR concept? Almost certainly, I suggest, not. Hence, the industry needs, as a matter of urgency, to be allowed to untangle the unholy mess created by the RDR by getting back to (relative) basics with a streamlined advice framework based on just Proposition, Costs, Risk and Tax. That’s all that 95% of the consumer market wants anyway (the bottom line, as client recently put it to me).

    Sadly and so typically, despite all representations from advisers actually doing the job at the coalface, the FSA refused steadfastly to acknowledge, much less take on board, this message and instead pressed maniacally ahead with its own agenda. We know best, so this is the way it’s going to be from 1st January 2013 onwards. Is the intermediary sector and the way in which it serves its customers in better shape now than it was just 12 or 18 months ago? If it is, then it’s hard to see how.

  2. I think G H is correct in what he is doing and seems to be doing it for the right reasons. if their members are anything like most other advisers, I also think that 95%+ will already be operating in the restricted space now with or without actually knowing it. I think the vast majority wouldn’t consider Film partnerships, EIS, Structured Products, VCT’s or Investment Trusts for clients wishing to invest modest to reasonable amounts of capital – say up to £30-£75K. These just would not really suit your everyday client for a variety of reasons. I would challenge any IFA to do a better job than WoM restricted for your “normal, run of the mill” client mentioned above.

    As all advisers know their clients extremely well and probably have done for many years I imagine these are kinaesthetically excluded by the adviser and don’t even make it onto the table for discussion. Whether they know this or not they are automatically making themselves restricted under the new definition even though they may not be doing anything differently now to before this ludicrous situation was invented.

    There will be more and more of this happening to protect the future of networks and their AR’s and it will eventually happen to DA firms too unless the FCA changes the definition to a more workable and logical one for independence. Something simple that a client will understand would be nice for a change.

    The biggest discussions I have with clients when trying to explain my WoM restricted offering is actually getting them to understand what restriction I placed upon myself. (No VCT, EIS, Investment Trusts). Their usual response is “but you have never advised us on any of those so what is different?”

    The whole mindset of independent label is one where it was important to distinguish oneself from a tied agent but that is ancient history and it really has lost its importance in that regard where clients are concerned. Clients still want us to be able to pick a suitable product to meet their needs and be able to show who we have recommended, why we have recommended them and how the product will solve a problem. IF we continue to do this in their best interests and show them that we have chosen what regard to be the best of the “bunch” from our research, they will remain happy campers. Once you get over that losing the indy title really is no big deal you will be in a much happier place and should lose very few if any clients.

    I am sure that Harry K or others may come back at me with the “we don’t sell, we advise” and that may be true in the minority of cases but for the huge majority of advisers, this is still a sales industry and that is something else we should be very, very proud of. We will all have some clients who only want advice and will pay us for our time or for doing a piece of work. Then they will either take our advice and act upon it or they will not act upon it but for the most part (read that as 99% in my case) my advice will lead to a sale of a suitable product being recommended. I very rarely charge any fee if they don’t do business with me

    The Indy badge will really only be important to those who advise HNW and VHNW clients but those firms are few and far between – they will not be competing for “ordinary” (or middle UK) clients and we will not be doing so for theirs.

  3. @Marty – I too think Sesame appear to have chosen to do the right thing for their Group, especially with a transition allowing ARs to move to DA if remaining Independent to them or their clients is important.

    Having been tied for about 6 years myself, unlike a reformed smoker, I have no issue with going restricted if MY or MY CLIENTS circumstances dictate. But I want to have that choice with my clients and will only do so if I need to.

    As to the challenge you mention – There is no need to challenge as I would agree the products you mention just would not really suit your everyday client for a variety of reasons and as an IFA all we have to do is put in place systems that means we can evidence we considered and discounted them for market segments or individuals, same as with use of WRAPs. We use several for different market segments and periodically review the whole market for WRAPs to make sure we are recommending going forward what we believe the most suitable for that market segment and in doing so can have in mind whether it may be appropriate to review usage for an individual client OR NOT. If our research indicates a review of wrap for a client may be appropriate we only review (and charge for it) if the client wants us to. a bit like Occupational pension Transfers, by not having G60 (or equivalent) we can explain the costs and the client can choose whether we refer to a Pension Transfer Specialist OR NOT. that is the clients choice, by explaining they have a choice, the costs and why a review may be appropriate they can decide whether they feel the cost may outweigh the benefit of a review and as many pension transfer specialist have a minimum CETV it makes the decision for the client more straightforward.

    I do wish you’d consider returning to IFA Marty if you are directly regulated anyway!

  4. IFA Networks are doomed, they cannot exist in the post RDR world and I can’t work out why the regulators haven’t been more proactive, been asleep at the wheel again?

    Any firm that wants to use introducers must accept responsibility for all business written, all due diligence, all compliance, all claims… everything.

    The naivety of all concerned is summed up in Julian Stevens’ “crunch question”, does he believe that ARs and RIs can flog any old thing that they find hiding under a rock?

  5. Of course not. You miss my point entirely. What if somebody’s preferred platform is and has for many years been, for example, CoFunds but Sesame decides to exclude CoFunds from its own limited panel of platform providers to which their AR’s may restrict themselves?

    Anyone with a substantial book of business already via CoFunds would be faced with a choice between either transferring the whole lot over to one of Sesame’s preferred platforms or quit.

    Nobody’s suggesting that Sesame AR’s should be free to multi-tie to any old panel of providers of their own choosing. The issue is the extent to which Sesame may seek to restrict their choice from all the providers with which its members are presently allowed to transact business on an Indy/WoM basis.


  6. Thinking about it, what has probably been the biggest single factor in Sesame’s decision to take this step are the intolerably and unrealistically onerous demands from the FCA of policing adherence across all its members to the requirements of providing Indy/WoM advice.

    Unless the network of which I’m an AR is atypical (which I doubt it is), I imagine that Sesame’s file checkers are just as bogged down in fractious arguments with its members over all the additional things they must now do to meet the required standards. Wars are developing between the networks and their members and members are leaving to get the hell away from this black cloud of interference and constant fault-finding of their best efforts to document their work. If something’s ruining your life, in this instance membership of a network that’s started treating you like some errant and incompetent employee, you’re going to look for the exit door aren’t you?

    In all probability, Sesame decided it just can’t carry on like this and, to stop the unsustainable drain on its resources, it’s going to have to change its status, whether its members are happy with that or not. Those who aren’t unhappy will probably leave within a year or so anyway.

    I predict that most of the other networks are all going to have to follow suit. It’s just a mater of time.

  7. Julian, please accept the fact that the network is (was) the IFA, it is responsible for everything so you have to do exactly as you are told, you have no autonomy whether it is an IFA or a multi tied agent.

  8. @Julian – EA makes a good point re the network is the IFAnand not the AR in practice. As an example I worked through the then largest Ethical IFA between 98 and 2002. KT wasn’t quite large enoight to be a small Network, but the principle and problems were the same and I left because of some of those problems. The supervision was not supported enough by coordinated IT and the hpgeogrphical spread of the ARs left the IFA firm at risk of censure by the FCA due to any one IFAs mistakes due to inadequate supervision. Having been asked by the compliance manager to review files of another AR and seen how bad they were I decided being a member put me at too hifgh risk of the IFA firm being suspended and as a result me being unable to work until reauthorized at a new firm so I fpdecided to go DA. This took time (about 4 months in 2002) but was the right thing to do as in 2004 the previous IFA found it could not get PI due to a members mistake and my friend still an AR could not work for nearly 9 months while he looked for a new network and in the end became DA too. He and I are both DA of 10 years or so.

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