Santander has recently announced plans to rebuild its financial advice arm, but should advisers and, more generally, society welcome this?
In the first instance, one might argue that many investment advisers have happily benefited from an upswing in business from the banks’ collective retreat.
It has, advisers tell me, often taken a little time to unwind the ‘advice’ concerned. And it seems to me that it has particularly benefited advisers in the regions, where lower sums under management can be serviced profitably.
There is another way of looking at the issue, however. That is to suggest that investment advisers – and society as a whole – would benefit from the presence of more places where people can be convinced to save and invest on the ‘non-shocking’ assumption that the Money Advice Service can’t take up the slack. From this perspective, any addition to the asset-gathering infrastructure, whether from banks or execution-only advisers, ultimately benefits everyone.
This case is strengthened if it is clear that ‘this time it really is different’ in terms of the culture within banks’ adviser teams.
Many investment advisers will be deeply cynical about whether banks can truly deliver.Yet many investment advisers will be deeply cynical about whether banks can truly deliver.
They will point to the litany of problems regarding suitability, client knowledge, perverse sales incentives and more to suggest that banks simply cannot make this work without huge fines, redress bills and another ignominious retreat.
History shows that banks need to be offering their services high enough up the income scale to justify the time taken and the remuneration involved. These are not small obstacles, even in a world where technology gets ever more efficient.
Therefore advisers may question whether any bank can deliver such a service to those with around £50,000 of assets, the lower end of the Santander range for their expanding service.
Yet here is a little bit of heresy from a columnist for investment advisers. Should these bank advisers perhaps be allowed an adjustment in the criteria surrounding full advice, if it was made clear that they were sales staff rather than financial advisers?
Even as I write this, I can see a host of problems that might arise and banks could see it as encouraging the return of a harder sales culture.
But current FCA rules – if enforced and applied correctly – should surely minimise this. In addition, the range of funds for sale could be restricted not just by the organisation itself but by regulation.
None of this is perfect. For instance, you can’t simplify a product to the extent that it becomes a safe way of investing in the stockmarket – well, not without complicating it all over again.
Yet I wonder if it wasn’t when bank advisers tried to be like IFAs that they were at greater risk of failing their customers.
Were someone to ask where I see banks’ role in extending the reach of financial services, I am not sure I would say it must be in providing ‘low-ish’ cost financial planning but rather in convincing more people to invest.
But it would have to be a very brave regulator that allowed it to happen.
John Lappin blogs about industry issues at www.themoneydebate.co.uk
