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
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's 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's 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's 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's 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's 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.