Since the inception of the retail distribution review the market has been flooded with research and wild predictions of what will happen to the sector after 2012.
Such research is only ever a snap-shot in time, based on the assumptions of an ever changing set of proposals and dependent on how informed and prepared those answering the questions are. One fundamental question is whether an adviser will continue as an IFA, will become restricted or will offer a combination of models.
Most research suggests the majority of IFAs intend to keep their status after the RDR, with a minority to offer a hybrid service and some offering a restricted-only service.
All such plans should be focused squarely on meeting the needs of the client, rather than the provider or distributor. One crucial area of disagreement at present is over the efficiencies that can, or cannot, be gained from offering a restricted service as opposed to an independent one.
As long as the FSA polices its rules properly, restricted advisers should be the agent of the client, independent in mindset, with nothing to cloud their judgement except ensuring the interests of the client are achieved.
Arguments in favour of restricted advice have focused on the efficiencies firms think they can achieve through technology and model portfolios to offer clients a decent “independent” service without jumping through the hoop of the FSA’s new definition of independence.
If you can lower the costs of advice to a certain segment of clients, without changing the standard of service or outcome, shouldn’t this be considered?
However, the million-dollar question is whether these efficiencies can really be achieved. Tenet, previously very open-minded to restricted advice, now believes the costs and complexities of remaining independent are not as onerous as first feared. If you cannot save the client money, why are you restricting your service?
In contrast, Aviva believes restricted advisers could save up to 40 per cent of the time of required of independent advice and forecasts a large movement of advisers to restricted.
All the research suggests next January will see neither a big bang of advisers leaving the market nor a huge shift to restricted advice.
However, it is healthy that such a debate is taking place as firms take a long hard look at their service propositions to ensure the financial planning needs of the client are the overriding driver.