Relationships are complicated things. They usually involve compromise, require a certain level of diplomacy and, if they are to have any longevity, must continue to function through the bad times as well as the good.
The relationship between intermediaries and providers has changed significantly since the RDR. No longer can companies tempt advisers into placing business with them by offering attractive commission rates; transactions must be on a fee-driven, upfront basis.
In the new, professional world, independent advisers must consider everything and everybody, while restricted may or may not narrow down their proposition. Either way, this requires extensive due diligence on providers, heightened levels of communication and a shift in who deals with what.
For many, this is old news and the move to a new model was made years ago. But some are still playing catch-up; the FCA’s recent paper on inducements shows that efforts are being made to maintain old-style agreements and that conflicts of interest are occurring. Neither of which can continue.
Things have changed, for better or worse. From overarching cultural changes to day-to-day tasks, business between advisers and providers is unrecognisable from a decade ago.
Goodbye, bias
Perhaps the most obvious change is the removal of commission. Most advisers will say they were not swayed by payments anyway and always had the client’s interests at heart. But anecdotal evidence of a spike in sales to one insurer when commission was accidentally bumped up suggests otherwise.
Whether we like to admit it or not, the opportunity for bias was there with different commission rates, and even if advisers were generally not swayed, the system left them open to suspicion of bias. For Paul Bayliss, director and head of wealth and adviser solutions at Pershing, the removal of this was a huge change.
“Fees have to be explicitly charged,” he says. “That does cause a material change in the relationship between provider and adviser firms. If you are completely client-centric and agnostic in terms of provider, that is a fundamental change from where we were five years ago.”
Aside from the uncomfortable link between selling a product and ensuring suitability, David Muncaster, head of intermediary sales at Close Brothers, believes the change provided opportunity for advisers to secure greater control.
“The impact of changing from commission to no commission was perhaps less than anticipated because of some of the communication about the RDR, and the desire for adviser firms to have a fee structure that has some longevity,” he says. “I think it was also the catalyst – or the excuse – to take their destiny away from the larger insurance-based providers.”
