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