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Journey to the core

It was very interesting to see the comments in MM last week after it was announced that Coutts was going to go whole of market.

Instead of outrage, we should be applauding their honesty. Their proposition is that they sell bonds to wealthy clients, in the main, for very attractive comm- ission terms. It doesn’t matter whether we agree with this or not, this is the reality. Since depolarisation, the FSA has already uncovered a number of firms that are clearly not offering a proper fee option to their clients, even though they suggest they are in their paperwork. Firms that copy the examples in the FSA literature have obviously not given any meaningful thought to a fee-based option as a genuine business model alternative. Those businesses that have successfully transitioned to a fee-based practice understand the work needed to get a proper structure in place. In some cases it would appear that businesses are holding on to the title of IFA, but in reality are devaluing the brand for the rest.

At some stage over the next couple of years, we will need to see a lot more honesty and transparency from businesses of all shapes and sizes if we are genuinely to move forward.

Only last week Peter Hargreaves was picking up on the lunacy of providers being able to offer high levels of indemnity comm- ission on contracts that are unlikely to stay on the books or be profitable for periods of up to 15 years. IFAs and product providers are going to have to accept that to build, sustain and grow a profitable business, there are still a number of fundam- ental changes that need to be made. The proposition and pricing have to be right and there has to be genuine value for the clients in the service they are being offered.

The big providers are all trying to second-guess the wrap market and what might be a winning strategy. There are already some good models in the marketplace and others will certainly join them. We will see in the next three to five years a reason- able percentage of the adviser sector using wrap and other technological support in a far more efficient way. Most, however, need genuine support to understand what the core proposition of a professional planner is.

We need to capture and share best prac- tice with a far wider audience to help build a stronger brand appreciation around a service like comprehensive financial planning.

When you see that just one per cent of the market has reached the level of Certified Financial Planner Licensee, you realise that we are still at the beginning of this journey.

Business transition is now essential for some. This involves inevitable upskilling, cultural change within a business, and buy-in to a process of working with clients, team- working and a solid business plan.

Inevitable concl- usions from pieces of work like the Turner report and Ned Cazalet’s study, will lead to continued pressure on indemnity commission.

And for advisers who want to operate in the advice market, there is an inevitability about offering a sensible fee structure.

The IFP is now able to support more and more businesses that are looking to build a modern financial planning practice, but for many, time will start to run out if changes aren’t started soon.

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