Welcome to the future of the past with restricted advice
This may become a cliché, but those with the most to fear from restricted advice after the RDR are financial product providers.
That should be no surprise. For an IFA, becoming a restricted adviser under the new rules is one thing. For a product provider losing your main route to the market – IFAs – is something else altogether.
Although in theory it is not their problem, it will do advisers no harm to consider the issue from the other side of the fence from time to time. At the very least, it might explain why fund salespeople may sound more nervous on the phone these days. We know the completely in-play section of the market – post-RDR IFAs – must surely get smaller, so there are reasons for some fund providers to worry.
It might be the restricted proposition we are talking about is more or less what independence is today
Advisers and product providers glimpsed one version of the future last week when Sesame Bankhall announced the firms it would partner with for its list of recommended products after the RDR. The adviser network – which may prove to be the biggest player in restricted advice – said it would link up with Aegon, Aviva, Friends Life, LV=, Partnership, Prudential, PruProtect and Zurich, although these may eventually be joined by a few others. This list covers pensions, investments, protection and planning for retirement, with a ‘best of breed’ panel for general insurance and a complete coverage of the mortgage market.
Some investment advisers have described this on comment boards as the kind of old school list that would be made by a multi-tied adviser with connections to a restricted range of firms. But I would argue it isn’t necessarily anything of the sort. The restricted advisers will still get access to Sesame One, Sesame’s version of platform Axa Elevate, which houses a broader range of investment products.
“Sesame One is the only platform restricted advisers can use,” Sesame’s spokespeople told me. “However, advisers don’t have to use it, and they can also access our extensive range of funds via the products and providers that are part of our restricted advice service if they wish. This is a restricted proposition but there is still a huge amount of flexibility available to enable advisers to meet their clients’ needs.”
There are a few other interesting details. In the video debate about independent and restricted advice on the website, Sesame Bankhall boss George Higginson implies that a restricted service may allow advisers to serve their less wealthy clients, perhaps within a hybrid restricted-independent business, and that several bigger Sesame firms are considering the move. This all seems fair enough to me.
There is, however, one quote from the debate I might query. Mr Higginson says: “It might be the restricted proposition we are talking about is more or less what independence is today.” That final assertion actually fits with what many advisers want – that is, they may restrict because they don’t want to change their business practices and see restricted as best describing what they do already.