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Limited advice may be the shape of things to come

As IFAs move upmarket and rely increasingly on fees, financial advice has

moved into the spotlight as a commodity sellable in itself.

It is clear that people are becoming ever more informed at the same time

as a proliferation of distribution channels emerges from which to buy

financial products.

Pretty Technical partner Kim North is fresh from a feasibility study into

the future of advice. She says the advent of multi-ties, ready to sell

off-the-shelf financial products that have been sanitised by Cat standards

or stakeholder regulations, has thrown advice sharply into relief.

Of the future depolarised landscape, North says: “Good quality holistic

financial planning will go up a gear and become a service to high-net-worth

individuals, corporate clients or those with complex requirements that

include inheritance tax or trust issues.”

But not everyone desires or requires this level of advice. North says the

prompt comes from the client. “Not everyone wants to sit down for hours

with an IFA in a shiny suit going through all their circumstances and


So with distinctions emerging in the level of advice offered, what are the

kinds of services that will be offered? Apart from the full advice service

traditionally offered by IFAs, based on a full fact-find and taking a

holistic view of the client&#39s financial needs, limited advice may also be


Definitions of this vary according to who you speak to. For some, limited

advice is that which a multi-tied agent would offer, ignoring the full

spectrum of an individual&#39s financial situation to sell a particular

product in a compliant manner.

In respect of IFAs, however, it tends to mean a focused approach to a

particular area of provision, usually falling within the IFA&#39s particular

area of specialisation.

Informed Choice managing director Nick Bamford already carries out a

pension healthcheck although he prefers to call it a financial planning

review. People submit their finances to him and, in return for a fee, he

reviews their provision. “Usually people&#39s arrangements are pretty good.

They just need a tweak here and there,” he says.

Bamford emphasises that what he is offering is focused advice which goes

through the same compliance hoops as any other advice he offers.

At a lower level, North agrees there is scope for offering limited advice

– “advice just enough to be compliant” – but she suggests this could be

dangerous and it is possible for the adviser to miss things.

The question then arises of how an IFA offering limited advice differs

from the multitied adviser. Fountain Independent Financial Management

business development manager Nikki James says it is the greater knowledge

base of the IFA that is the important differentiator.

DBS managing director Alan Taylor emphasises how careful IFAs have to be

from a compliance perspective. One area where he thinks there could be room

for manoeuvre is in the increased use of paraplanners who could be sent out

to gather information to pass on to the firm&#39s RIs.

But he too warns of the dangers of limited advice and the idea that

cheapest might be best. Unlike the multi-tied agent, the IFA is still

obliged to take a full view and provide a reasons why letter. But the

question will be to what extent clients perceive this advice as added value

and whether they will be willing to pay for it.

Even FSA chairman Howard Davies has mooted the possibility of simplified

advice. Speaking at the Labour Party conference two years ago, he said: “If

the product is simple, it is perfectly possible to devise a cut down advice

process.” This was before the planting of the infamous decision trees and,

in any event, the FSA now says Davies was speculating at the time.

However, it shows that, even at the very top, creative thinking about

advice is taking, or has taken, place. Of course, the regulator is emphatic

that decision trees are not advice and is predictably strict on the

question of advice.

According to an FSA spokesman: “There is only the one regime – there is no

scope for pared-down advice. It would be like having different traffic

rules for big and small cars. For regulatory purposes, advice is linked to

the selling of products.”

From a regulatory perspective, under the current regime, the suitability

of advice takes precedence over that of the product. But the door is open

to IFAs to market a variety of advisory services that are not linked to the

sale of a particular product.

Nikki James says product pushing is an antiquated form of selling and

welcomes the fact that this is finally being recognised in financial

services. “Good advice is also good PR and you should not be too worried if

the sale takes a day or a year,” she says.

One thing seems clear – with the revision of polarisation and easier

availability of financial products, many products will be bought without

advice. If there is a separation of the purchase from advice, there will be

a growing opportunity to sell advice, particularly reviewing direct


It is up to IFAs to position themselves to take advantage of this opportunity.


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