Marketing email sparks cost of independence row
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In focus: Future of Independence
The cost and difficulty of remaining independent has been called into question after a mass email from adviser consultancy Harrison Spence Partnership claimed fees will likely be “prohibitively high”.
In a marketing email to financial advisers, Brian Spence, managing partner at Harrison Spence Partnership, said many advisers will find the burden of remaining independent post-RDR difficult, if not impossible, to bear.
The email said: “Providing truly independent advice is extremely expensive. The sales pitch may be compelling, but the research burden is lethal. And, as a result, fees are likely to be prohibitively high.
“By contrast, providing restricted advice can be very lucrative. It’s simpler to manage, more cost-effective and may actually be close to what you’re doing already.”
Mr Spence’s email has drawn strong reactions from advisers who intend to remain independent after the regulatory change.
Kevin Moss, director of adviser network ValidPath, argued that while there could be initial costs associated with remaining independent, once the changeover had finished, the cost of running an independent business would remain mostly comparable to pre-RDR.
He criticised Mr Spence of using scare tactics to promote the adviser consultancy business, specialising in mergers and acquisitions of advice firms.
Mr Moss’s email reply to Mr Spence said: “I have to say that this is the kind of email which is so thoroughly deceptive that, if you were regulated by a professional body, you would be reported for it.
“Those firms who are bigging up the cost of independence in order to stampede practicioners into a restricted business model have ulterior motives for what they are doing, and it’s hardly rocket science to see what those motives might be.”
Mr Moss is a member of a practitioners’ panel which works with the Financial Services Authority and meets twice annually.
Mr Moss’s email said: “If there are pressures on IFAs to abandon independence, whilst they may well derive from economic issues of self-interest, they do not owe their origins to anything in the RDR per se, other than the greater transparency which requires firms and advisers to actually deliver on their claims.”
Speaking to FTAdviser, Mr Moss said: “There is bound to be an associated cost in getting your model fixed according to your client needs, but after that as far as we are concerned it’s business as usual.
“There is no greater onus on IFAs, and the FSA isn’t changing its definition of independence. If you are independent you have to be independent: Those responsibilities have always been there and all the FSA is doing is clarifying the range of investment types.”
However, Alan Marks, senior partner at Harrison Spence Partnership, insisted there will be additional costs to remain independent.