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Kim North: Platforms will have to fill the advice gap

Kim North

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 (kim@techandtech.co.uk) is director of guidetoadvice.co.uk

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Becoming a headcase IFA 10th May 2013 at 3:40 pm

    Kim, Can you please tell me what a simplified product will look like?

    Is it a product that the ‘simple’ adviser cannot be sued for recommending and, if so what will the underlying investment be?

    I would not believe that the vast majority of ‘advisers’ having a discussion with a member of the public would not influence the advice, as you put it, on your website. In fact I don’t even know what that means. If they are not giving advice then whose advice are they not influencing?

  2. Kim

    I watched a recent Hargreaves Lansdown video on the potential corporate bond bubble and what investors should do with their portfolios.

    This maybe simply information or could it be construed as advice even though that advice is on a mass scale. The makers of the video obviously had concerns that the video could be construed as advice because there was a quite prominent risk warning at the end of the video stating that this video should not be construed as advice and that if you have any doubts you should seek independent financial advice.

    The rise of information only and execution only services has been allowed to happen with no challenge from the regulator. I suppose that the problems will come about when investors start to take action against these services for what they perceive to be incorrect information.

    The only thing I’m concerned about is whether the FCA is actually doing its regulatory duty by not reviewing these services after all don’t they have a statutory objective to protect consumers and to protect the integrity of financial services.

    What happens when the information on one of these websites is deemed to be misleading or even wrong – who pays the compensation! A good example would be Martin Lewis website MES pre-2008 he was heavily recommending Icelandic banks without pointing out compensation levels. Channel 4 pitted an investor who lost £150,000 against Martin. Source of info Guardian 1st June 2012.

    If we going to have information only sites surely they should be in a class on their own rather than being in the same class as advisers.

    There also needs to be a clearer definition of what advice actually means an end to some of the practices that some execution only services do. After all execution only is meant to be without any interaction or guidance!

  3. @ Peter Herd – I agree with your post above. We had NO clients with mroe than the FSCS limit in any bank when they collpased, that included clients we’d taken on who previous to our involvement had over £400k on deposit with Northern Rock before the proverbial hit the fan and clients with under £10k who DID have money on deposit with NRock or Icesave. The point being we’d discussed and advised about spreading rather than concentrating risk. ADVICE is easy, making sure somone implements that advice correctly is what is actually mroe important.

    Commisison did focus too much on sales, but FEES risks focusing on product advice or marketing at the expense of sensible implementation. Our job as adviser can as often as not be to advise NOT to do something!

    I very much agree with Kim North’s last three paras

    1. 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.

    2. ….online guidance (simplified advice should not be used, it’s either advice or it is NOT) backed up with telephone, email and Skype support may well be the solution for the mass market.

    3. the sooner simplified guidance (drop the word advice where it is NOT) regulations are in place there will be better access to financial services for everyone than wants help and cannot afford full on advice…..

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