Baigrie’s point is that “a key threat to the growth and success of advice in financial services was the near unregulated growth and success of non-advised selling in financial services. The advent of RDR has crystallised that threat by considering a huge raft of change that advisers will have to cope with while non-advisers will face no such cost of change.”
One might imagine that consumer-facing organisations would have voiced some support for the concept of a relatively cheap way of providing advice to the mass market. Yet the evidence points to the fact that most consumer bodies are also turning against this key aspect of the proposals.
Last week, as MM also reported, the Financial Services Consumer Panel described the FSA’s plans as not having any value. Chairman John Howard was quoted as saying that there should be a two-tier system consisting of “independent advice” and “sales”, with only advisers who have passed approp-riate exams, researched widely and provide unbiased, fee-based advice able to use the independent tag.
In one sense, there is nothing strikingly unusual about his comments. The FSCP was opposed to the depolarisation proposals first put forward in 2001. Howard’s proposals in this area echo uncannily the former polarised regime that has since bitten the dust.
But if we accept the validity of reports that some senior figures within the regulator are starting to have doubts about the value of the primary advice proposals, believing that they may lead to consumer detriment, the FSA has some serious problems.
That said, tempting as it may be to believe that the FSA will amend some of the more contentious aspects of the proposals – and even accept the CII’s “compromise” on training and competence, which would mean advisers would “double up” their qualifications in the next four years, with a further two-year grace period, that still does not remove the current threat to many IFAs.
There is another threat to IFAs that few seem to have considered yet and that is the online world, which raises the potential for many thousands of so-called mass-affluent customers – indepen dent advisers’ natural feeding ground – to desert them in favour of something both cheaper and, arguably, more efficient and effective.
They have tended either to use IFAs on occasion or to shelter their assets in short-term savings accounts. But as more and more people have broadband access and price comparison websites grow in popularity, it is not too difficult to foresee a time when a site will develop an all-singing, all-dancing mechanism to provide independent advice online.
It was tried six or seven years ago and did not work well, partly because the technology was not robust enough. Today, however, the same wrap platforms developed by a number of software houses and even life companies and fund managers and used with growing success by many IFAs could easily be turned to face consumers directly, allowing them to input pers-onal information and provi-ding them with extremely thorough financial reports and ongoing reviews of assets.
If a system were developed that is robust yet simple enough for people to use and if it were shown that it is as effective as traditional forms of face-to-face advice, it could win a significant slice of that mass-affluent market, currently mined with varying degrees of success by IFAs.
You think it won’t happen? Think again. Ten years ago, all it took was one or two comparison sites to realise that the same mortgage information they were supplying to brokers could just as easily be provided to consumers and then add other product lines for the online phenomenon we see today.
The problem for independent advice, it seems to me, is that primary advice is not the only danger facing advisers. They will be squeezed from more than one direction – and only the strongest and most technologically able will survive.
Nic Cicutti is editor of moneysupermarket.com. He can be contacted at firstname.lastname@example.org.