We are currently witnessing the death of financial advice death on the High Street as the big banks such as HSBC, Barclays, Lloyds and Santander are closing their financial advice offering to the mass market.
Life insurance companies such as Axa and Aviva are also bowing out of providing direct advice due to the increased cost of complying with the the RDR. One of main intentions of the RDR was to move the industry away from being able to buy distribution. I’m sure the intention was not to see distribution considerably reduced which is what is happening.
But where should those not tolerant to adviser charging go for financial advice?
In the year to April over 2 million people used the Money Advice Service, the vast majority online. As we all know the MAS does not provide regulated advice. The MAS refers clients to financial advisers which makes the consumer subject to adviser or consultancy charging resulting in many not being able to afford to pay for personal regulated advice.
DIY financial planning using the wealth of financial information available online will be the only route for millions of people.
Platforms that are consumer facing are a solution to the death of High Street financial advice, as customers can access their investments 24/7, can switch, increase or cash in at their will. Look at the success of Hargreaves Landsdown an early pioneer of platforms who looked at the platforms around and decided to build their own.
At last we have the FCA Policy statement outlining what platforms can charge for and how cash and unit rebates can work.
FCA PS 13/1, designed in the new brand of the new regulator in a bright cerise which already looks a little dated and a new logo a child could design, is interesting reading.
A change to previous platform regulations will allow all financial firms; including fund managers and life companies to pay platforms for marketing, research, management information, correcting pricing errors and administrating corporate actions (the PS is not clear as to which corporate actions are included).
This is good news for digital marketing and research agencies and those that are experts in a spread sheet environment to collate MI. As long as there are no ridiculously high amounts paid for these services, this opens up an attractive revenue stream for platforms.
Any rate card equivalent for banner or pop-up adverts paid for by product providers to platforms will be increased as will research and MI costs. For the platforms this will replace the lost revenue from product providers previously paying to list their products on a platform.
If platforms can link to online financial advice offers or can market directly to the consumers as Fidelity is already doing, this may fill the advice gap.
It saddens me however that a consumer’s or employer’s financial well being always has better outcomes over the longer term if regulated advice is provided compared to those who DIY.
Platforms that provide online simplified advice backed up with telephone, email and Skype support may well be the solution for the mass market.
I agree whole heartedly with the Lords that the sooner simplified advice regulations are in place there will be better access to financial advice for everyone than wants financial advice.
Kim North (firstname.lastname@example.org) is director of guidetoadvice.co.uk