Having read and listened to some of the more bizarre, misleading and ultimately misguided mutterings on the subject of “conflict of interest” as it relates to the ownership of wrap platforms, I hugely welcome this opportunity to pen a few words.
So, starting with a pop quiz, does a conflict of interest typically occur when:
a: A group of high quality, professional IFAs get together to invest in a management team that will develop and launch a shared wrap platform orb: A group of well established platform providers form a closed group to chew over and, as yet, do nothing to resolve re-registration which is the key issue facing the wrap and platform markets orc: A group of platform providers seek to constrain consumer and investor choice by insisting on fees for shelf space and financial incentives from underlying fund management groups?
If you answered (a), you probably work for a life office that is terrified by the emerging reality that IFAs are increasingly professionalising and taking ever more control of their clients’ affairs and their own destiny.
If you answered (b) or (c), you are probably an enlightened adviser who is working for your clients to buy services on their behalf, rather than a commission-hungry salesperson who is working for providers to sell products to an often unsuspecting public.
The financial services industry has generally failed the UK public as the prevailing business model has been loaded against the consumer.
The conflict of interest that is inherent in the current model is exactly why the life sector is in terminal decline and the IFA sector is going through such substantial changes – the commission model is broken and those who created it need to find alternative ways of generating a return on capital.
Speaking generally, IFAs have become frustrated at the life sector’s continued insistence on controlling their proposition and the way in which their clients pay.
To be questioned for wanting to exercise greater control over your business and for putting up the capital to deliver on that goal is absurd.
I wonder if some of the wrap providers which also have asset management arms that presumably do rather well from their distribution through Hargreaves Lansdown believe that HL’s ownership of Vantage should be immediately broken up and distributed among the top 10 UK life offices. Is this what is being sought? So, conflict of interest? What does it mean for you? Could it mean seeking to protect your embedded value or assets under management by preventing the free movement of assets between platforms or insisting that IFAs and their clients are only able to invest in funds that the platform kind of likes (for obvious reasons)?
Or could it be that running what is probably the most flexible, open, transparent and aligned client proposition in the market is doing nothing but promoting conflict of interest? I know where I stand. Over to you…
David Ferguson, chief executive, Nucleus