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Phil Billingham: What problem is Sesame trying to solve?

Sesame’s restricted move will benefit the network but leaves advisers with a difficult decision.


There has been a huge amount of press and blog comment about the decision of Sesame to relinquish its independent status in favour of a restricted model.

As is usually the case in these situations, many of the comments delivered more heat than light. I would include some fairly fanciful definitions of what the FCA regards as independent in this category.

However, can we perhaps look at this situation from another, less emotional viewpoint – what problem are the parties involved actually trying to solve here?

Sesame have historically had two operational concerns. The first is about the quantum of liabilities the firm has accumulated. The second is underlying profitability.

Seen through these angles, the move to a restricted offering makes complete sense. It allows them to manage down future liabilities by focussing new business into a narrower range of products or funds that can be ‘detoxified’, benefiting clients, advisers but especially the network.

That control alone will help support ongoing profitability, and deliver greater certainty to shareholders.

What’s not to love? Why all the angst?

Well, there is another viewpoint here. That of the advisers.

It’s worth exploring the demographic of the typical network adviser here.

In my head, this is a man in his 50s who has been in the business since Noah was a lad. He is probably a former direct salesman used to running his own show, and fiercely independent and passionate about his clients. So yes – someone just like me, in short.

They usually work in small firms, often with only two or three advisers, with a couple of support staff. They earn a decent living, but are working harder than they have for a while.

And what problem are they trying to solve? Well, it’s always the same problem. Attracting and keeping the right clients.

And there lies the rub. Since 1988, the overwhelming ‘brand’ has been the ‘independent’ brand. “I’m an IFA, Mr Client. That means I can search the whole market for you, so you don’t have to,”

That’s without looking at the complex issues around the conflicts of interests involved in accountants and solicitors referring to ‘restricted’ advisers.

So these are two different problems, and the proposed solution appears to me to possibly solve the network’s problem – liabilities – and increase by a yet unknown quantum the adviser’s problem – which is marketing and branding.

We have yet to see how this scenario will play out. I believe we will see a significant reduction in members of the network, although they may attract some advisers for whom the branding issues are not a concern. That’s just business, and there is certainly room for all in the market.

That does just leave me with one slightly bad taste in the mouth. They could have come out and said, “Hey chaps, it’s like this: We need to make more money and to reduce liabilities. This restricted gig looks good – how about we go this way?”

Instead they have chosen the age honoured “beware the monster under the bed” tactic. The message is: “Hey guys, it’s not us. We would stay independent, but the horrible FCA monster is forcing us to do this. Bad, bad FCA! But you better stay with us. If you go out on your own, the big bad FCA will eat you.”

There is no monster under the bed. For many members staying and being restricted will work. Others will be better off going direct. It will be for them to make a business case either way.

Phil Billingham is director of the Phil Billingham Partnership



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There are 11 comments at the moment, we would love to hear your opinion too.

  1. Amazing chap is Mr Billingham he’s achieved very little as an adviser yet can speak for firms he knows nothing about.

    Do you use tarot cards or a crystal ball to decide firms would be better of direct?

  2. Oh come along now… who is the person who sees most value in the IFA badge? Certainly not the client! Actually, it’s not about advisers it’s about clients and through a well chosen panel customers and their advisers can still have access to as many quality funds and wrappers as they need. If by offering a restricted provider panel, a firm can better manage its risks, so much the better.

  3. I heard various viewpoints from Sesame over the last 2 or so years and we read between the lines of their apparent preference for a restricted status.

    I can understand the decision by Sesame (and suspect the drivers may well be as outlined above) but we feel that independence does have it’s place and given the nature of our clients we intend to retain our independence.

    Maintaining independence hasn’t been as trying as we were being told it would be by all the companies keen to discuss our ‘proposition’ last year.

  4. Phil

    The ‘elephant in your article’ is the presumption that network members were truly independent in the first place. A debateable point.

    As to Cue Ball and other nay sayers I would only refer to the Aesop’s fable of the fox without a tail.

  5. I agree with Phil B and Harry. There is nothing wrong with being Restricted and it is sad that those uncomfortable with their choice to go restricted seem to wan to knock those of us who have chosen to remain Independent. Our sales training 20 years ago told as NEVEr to belittle the opposition has it often backfired with client s. I make sure I explain why I may choose as an IFA to introduce a client to a restricted adviser for a specialist piece of work I COULD do if the client would like me to, but would take me 10 times longer and this cost more, the client can get me to do it, so I restrict nothing, it is them who put a cost restriction, not me.

  6. I think the biggest problem for intermediaries is meeting the standards of WoM research on and comparison of every product type they may wish to recommend (every PP on the market? Every platform on the market? Every investment bond on the market? ~ it’s impossibly time consuming and largely unnecessary) and the ensuing battles with the file checkers who decree that they’ve failed to do so. Such scenarios are simply not commercially sustainable, whilst most of the networks themselves already operate approved (as in not WoM) panels to which their members have to adhere. What’s the point of researching products or platforms that you know before you start that you aren’t going to recommend? And, looking back to the AEQUOS system, you can’t possibly maintain an encyclopaedic awareness of all the features of every product on the market or, at least as crucial, the standards of service and administration behind each of them. You might select what looks on paper like the best/most suitable product in a particular category, only to find the admin’s a nightmare. So you’ve done neither yourself or your client any favours in recommending what nly looked like the best product in its class.

    As I see it, the only practical way forward is for the great majority of intermediaries to move towards a streamlined advice model ~ Proposition, Costs, Risks & Tax. And, let’s face it, that’s all that the vast majority of clients want anyway. How many clients have ever complained that they’ve been disadvantaged by not having been recommended to Platform B instead of Platform A because the former would have been 0.2% p.a. cheaper? It just doesn’t happen. The real issues lie elsewhere.

    The main reason we are where we are now, i.e. in a mess, is because of the obsessive pursuit of a perfect Utopian world on the part of a bunch of armchair theorists with no idea about how things actually work (or won’t work) in the real world.

  7. Harry Katz, Are you referring to the fact that all Independent Advisers will prefer not to deal with some products or product providers or simply making an unjustified and scurrilous suggestion that Sesame members are less Independent than non network members. We pay for a full time research department to provide a recommended and approved list without any reference up to December 31st to commissions on products. We also retain the right to go outside that list but, just like other advisers then take the responsibility for that decision on ourselves. As to the general point what business is it of the FCA to make their own decision as to what constitutes Independence ? and if, according to them we can claim whole of market for certain areas of expertise, but this is then defined by them as restricted what is wrong with being an IFA in that area of expertise ? Some IFAS, like GPs are Jack of all trades and master of none – others have been IFAs specialising in pensions or investment or whatever. Why should they now have to change their status to please a meddling Regulator ?

  8. @ Frank Dennis

    Dear Frank

    I suggest you confer with Julian. He recently posted a rather unedifying experience with his network which expresses the point more eloquently than I can.

    Independence has many definitions and attributes.

    Not being beholding to others (except the regulator and the taxman) is a good start. Making and standing by your own decisions – both in business and with regard to regulation is another. It is all very well relying on others to do your research, but for a really good understanding it is perhaps better not to take things as read. A Sophist and Cynical approach is not appreciated by those trying to impose conformity (The Networks).

    The debate is interminable and I fear we are never likely to agree. It is akin to on the one hand always having ‘run your own show’ or on the other having been a loyal ‘company man’. The two are in my view generally incompatible, but I will admit there have been notable exceptions.

  9. As ever some interesting replies – thank you.

    I am embarrassed to admit it, but I must retract one of my assertions. Sesame have not in fact blamed the FCA, as I stated. Sorry, I was wrong to say so

    The fact that others HAVE blamed the FCA and conjured up the ‘Monster under the Bed’ does not excuse me. Mea Culpa, I think is the right wording

    For the record, I believe there is nothing wrong with a clear Restricted model, but that Independence is perfectly attainable if you want it. As Julian states, some compliance staff are making it all much too complicated. Even the FCA are saying so.

    Anyway, apologies to all at Sesame for my mistake

  10. I agree that advisers will need to work smarter to adhere to the new definition of independence but it is not impossible and does not open vast cans of liabilities. Those risks are in fact in the mainstream dodgy stuff like Keydata and Arch Cru, which require not reams of mathematical analysis but sufficient common sense and experience to judge correctly as being valid or a scam.
    Phil is right that networks want to manage their liabilities and the best way to do that is to be restricted. The same goes for any national adviser operation. I continue to believe that advisers with professional attitudes and aspirations will make a success of independence.

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