Recently read that as providers no longer had the leverage from high commission or from junkets, they will inevitably buy distribution.
Back in the mid- to late-Eighties they bought estate agents. A friend of mine sold a single office for £1m. When I explained that his extremely restrictive covenant would need to have been registered with the courts, he checked and found it had not. He bought the shop across the road, left the purchasers and opened up as if nothing had happened.
Another person I knew sold an address list of offices at £1m per branch but when the purchaser visited one location they found they did not own the building or a long lease, but a space in an IFA’s window and a large plastic unit that held house particulars.
That is just two examples. In the last few years we have seen providers overpay for software houses and compliance services as a means to gain some control over distribution.
Why don’t they deliver exceptional service at minimal cost and support us in delivering value? With a few exceptions, few senior individuals at the providers are endowed with the creativity or interest to take a client-centric approach.
When you consider that many of the major providers are making more of a margin on cash than risk-based investments, is it any wonder that trust is in short supply?
Their inability to connect assets to real people underlines they are not fit to control distribution – far less own it.
Last week also saw Mark Hoban, formerly of the Treasury, telling us the RDR was nothing to do with him.
Is this not the same Treasury Minister who dismissed calls for the RDR to be scrapped, stating that the current minimum level of qualification for financial advisers was the same as a McDonald’s employee?
In case it has simply slipped his mind, he was speaking at a Westminster Hall at a debate organised by Harriett Baldwin MP, who had complained that the RDR would deny consumers access to financial advice and push experienced IFAs out of the profession.
The man who now says he had nothing to do with the RDR then repeated his point that the RDR would lead to a better outcome for consumers and draw new blood into a revitalised profession.
“Whilst the RDR is the responsibility of the Financial Services Authority, I fully support its objectives,” said Hoban.
“It is worth bearing in mind that the current minimum financial adviser qualification is at the same level as a diploma in shift management offered by McDonald’s. I think we should reflect on that; the products sold by IFAs are infinitely more complex and long lasting in their effect than a Big Mac.”
To be fair he also mentioned that the FSA planned to launch an investigation into how banks incentivised tied financial advisers to sell products but this was only in response to a remark from Baldwin that the RDR would benefit banks and bancassurers.
His remarks do not, however, support his latest outburst that he had no involvement in the RDR.
Perhaps with his skill in well considered communications, the recent vacancy at the Co-op could be just the job for him.
What’s the connection with Hoban and providers buying distribution?
Neither party is well informed or recalls the mistakes of the past.
Robert Reid is managing director of Syndaxi Chartered Financial Planners