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What advisers are saying: The ant death spiral


There’s a price for blindly following those in front of you. Take army ants for instance. These insects have a dangerous tendency to commit mass suicide just because they’re following the leader.

This bizarre phenomenon — in which ants circle around and around until they all drop dead of exhaustion — is called an “ant mill.” More colloquially (among the ant cognoscenti) it’s often referred to as an “ant death spiral” – those guys are so dramatic!

I won’t go into the detail (mostly because I can’t) but essentially you have this complex society that can accomplish amazing things, but also has an error in its programming that, occasionally, causes many of its members to get stuck in a rut and die tragically. You can see where I’m going with this can’t you?

The current market situation is (in parts at least) analogous to the ant death spiral. With all the talk of a brand spanking ‘new world’ it remains to be seen how much has truly changed. Of course there was never going to be the kind of apocalyptic scenario peddled in some corners of the blogosphere but there’s growing evidence that while things may appear different post RDR, below the surface much of the old world plumbing remains intact, with a large proportion of the value chain reverting to what it is most comfortable with.  

Providers continue to obsess with gobbling up assets under management with life companies getting as close to distribution as possible through whatever means possible – see platform proliferation – rather than focussing on innovating around their (supposed) core competency of risk mitigation.

Charges of ‘change feigning’  could also be levelled at advisers who, latest research from Action Consulting reveals, are still largely using the ‘contingent’ model, with many broadly following the charging model they operated pre-RDR, typically 3% plus 0.5%pa. The newly badged FCA is better at dealing with the press for sure but, as your esteemed editor pointed out last week, is still stuck in self-preservation mode doing whatever it can to position the RDR as a success, despite some figures that could suggest otherwise.

There are exceptions, but the big picture is of a lot of players following the same old patterns. The short and medium term impact (if everyone sticks to the blueprint) may offer modest security but the long term implications are less than rosy if the ‘ant mill’ is anything to go by.

Or you could break rank and take a risk. After all, sometimes the most risky strategy in the world is to take no risk at all.

Phil Wickenden is managing director of So Here’s The Plan



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