Independent financial advisers may have traditionally attached comparatively little importance to the management of cash but that is expected to change with the looming introduction of the Retail Distribution Review, according to Peter Beavis of Cater Allen Private Bank.
While the national press has, understandably, focused heavily on the way consumers are going to be charged for the advice they receive, intermediaries have been faced with a series of questions. What charging model should they put in place, what additional qualifications are they going to need in order to meet RDR requirements and, what other steps do they need to take to bring themselves up to speed with RDR?
One key area, according to Beavis, that has fallen under the radar is how the product landscape might change. Many providers have, understandably, expressed concerns that sales of particular products may fall. However, one direct result of RDR is that intermediaries are going to have to look at ways of enhancing their proposition to the market. And one area where this could be achieved is in cash management.
“Historically, cash has been a poor relation in the investment world but when you start to consider the fact people will be paying fees for advice it provides a great opportunity for advisers to start engaging with clients much earlier in the transaction chain,” he says.
The bank’s sales director acknowledges that cash has enjoyed very little prominence so far, with many intermediaries having naturally been more drawn towards products generating sales or trail commission, but he believes the new regulatory environment alongside the recent increase in market instability will herald a change.
“The economic backdrop has already resulted in a step change in the way cash is viewed by investors. Whilst it’s always formed the bedrock of most portfolios, this has been heightened recently by the increased volatility seen in the markets, which has resulted in a lot of people turning towards cash as a safe haven and a secure asset class, a low interest rate being the cost of the security.”
Cater Allen, which is a wholly owned subsidiary of Santander UK plc, is well positioned to comment as it boasts more than 150 years of experience working with professional financial advisers in the UK and has based its reputation around the core values of courtesy, convenience and service.
Its growing range of bank accounts and structured solutions is designed to be consistent with the needs of clients’ cash portfolios, and includes current accounts, savings accounts, fixed term deposits and structured deposits for personal as well as corporate clients. Whatever the requirement there is a cash solution available.
Cater Allen believes the insight it has into the needs of financial intermediaries, as well as the various personal and business requirements of their clients, twinned with its strong service reputation, enables it to focus on what it does best: developing banking solutions tailored to meet their needs.
“Most financial advisers will have heard of Cater Allen but many won’t know what it does or how it can help them,” says Mr Beavis. “However, we have lots of options for them to consider when it comes to managing cash more effectively for their clients.”
For example, the business is dedicated to the intermediary market and as such has a no cross sell guarantee which ensures that financial advisers can feel secure in recommending their clients to the bank with the knowledge that they will not be approached without their consent.
“We sign up to a non-cross sell guarantee from the outset so that advisers can feel safe in the knowledge that we are not going to jeopardise their existing client relationships in any way,” he explains.
Although it is clearly not a high street bank itself, indeed Cater Allen has its own banking license, the parentage of Santander UK means its full support in terms of Santander’s strength and security as well as the unconditional guarantee of all deposits.
“We are also very flexible in terms of the products we offer and have developed specific solutions for accountants, pension administrators, and financial advisers in order to help them manage cash flow for clients in a more efficient way,” adds Mr Beavis.
It might be one of the biggest challenges that advisers have faced, and are likely to come across in their careers, but Cater Allen’s extensive experience and heritage as the only UK bank to be designed around the intermediary, means it’s very well placed to cope with the demands of the introduction of RDR.
“There’s no question that this is a pivotal point in terms of the advice giving process,” he says. “Financial intermediaries will need to be properly qualified and their service propositions will determine their rate of success going forward, given the fact that commission will no longer be an influential factor.”
Mr Beavis believes this will suit many advisers. “I see a change in how the financial landscape will look going forward but even though the emergence of restricted advice models will be more prevalent, the overall quality of advice and standards are going to improve as a result. This can only be great news for people seeking independent advice.”
Of course, cash technically falls outside the scope of RDR which means banks such as Cater Allen could quite comfortably keep their propositions the same. In theory, of course, that’s fine, but whilst the FSA has decided that cash doesn’t need to follow the same treatment as investments, ultimately this could change, and how RDR evolves could influence that change.
In fact, in the case of structured deposits, it’s most likely that providers will change the manufacturing process in order to have ‘RDR-friendly’ structured deposits that will share the same characteristics as other RDR-compliant investments.
“Advisers will be changing their back office models to a zero commission basis and everything they do will be transacted in a different way in the future,” he says. “We’d be very naive if we didn’t start looking at how we interacted with people and provided services to support them.”
Looking to the future, Mr Beavis is convinced that not only will cash play an increasingly important role within investors’ portfolios but also that they will pay far closer attention to how it can work on their behalf.
“The market has traditionally been led by equity based investments, comparisons with indices, and looking at the upside of gains in various structures,” he says. “However, we believe that cash deposits have something to offer the market and that they’re going to become more important. Therefore, it’s vital that advisers have a plan for managing cash in order to meet those expectations.”
This means that many advisers need to reconsider their approach to cash.
“Offering a proposition that involves cash management provides an enhancement to their overall level of service,” insists Mr Beavis. “It also allows advisers to act in a more holistic style that will hopefully send the right message to their clients about financial planning.”
And whatever they decide to do Cater Allen will work with them to manage the overall proposition, he points out. “We offer an extensive range of solutions and have some really good ways to help advisers make their clients’ cash work much more effectively.”
There is no doubt that RDR is a ‘game changer’ and whilst the onus will be on the intermediary, providers will also need to change in order to embrace the new world and provide intermediaries with the tools, support and products they need to be successful.
