At the turn of the year there was a great deal of noise regarding regulatory status amidst the great ‘independent against restricted’ debate as each side sought to justify its position, with sneering across the fence at one’s neighbours being the order of the day.
In hindsight, six months on, it does look to have been just that – noise, with one thing and one thing alone becoming evident – the client simply does not care. As long as their advisers are there when they need them, keep in touch, can meet the daily challenge of demonstrating value over cost and, of course, answer positively the annual question: ‘how am I doing?’, all in the garden is rosy. The only thing clients have ever cared about is that they feel looked after by someone they like and trust and that their planning meets their objectives.
So in many ways, irrespective of the decision of whether to go independent or restricted, nothing seems to have changed and the noise has died down. We have better things to think about. After all if the consumer does not care, why should we?
If anything the retail distribution review has achieved what it set out to and created a new honesty and transparency in the market. Now that the dust is settling, those still advising have (hopefully) fulfilled their exam requirements and commission is now broadly a thing of the past with regards to investment and pensions business.
For me, however, falling over the ‘finishing line’ of demonstrable competence or moving to a fee-based model was never what RDR was about. I believe that the real demand of advisory firms was that they finally establish and develop a true client proposition, one which clearly defines what a firm does and how it does it, what it charges for its service and what the client should receive for his patronage.
The days of simply being able to say: ‘because we have access to every provider in the market and are independent, we can best service your requirements’ – the ‘one-liner’ prevalent on nearly every IFA website in the country – are over and our world is a better place for it.
Independent or restricted advice are not propositions on their own; companies must create an identity for themselves, build a reputation for excellence, stand or fall by the quality of their service and their ability to meet client needs. RDR has required advisory firms to create ‘brand personality’ to identify what makes them stand out from the crowd and, in doing so, has created a new era of competition in the market.
Client proposition is now key. Advisory and wealth management firms must now ‘differentiate’. They must identify what makes them special, what makes them a ‘safe pair of hands’ and why they should be chosen above the competition. And with such a proposition in place it must be easy to understand, easy and cost-effective to deliver and, of course, easy to control. Most importantly for success to be achieved, it must be easy to ‘market’.
If RDR demanded the establishment of a clear and deliverable client proposition then the decision to follow a restricted model theoretically made this challenge easier. The firm ‘nailing of one’s colours’ to a mast, being able to clearly say: ‘this is what we do for you’ and how much it costs clearly created immediate differentiation, a godsend in marketing terms. If you can clearly communicate what you do and how you do it, you can communicate ‘brand’ and clients can make an unequivocal choice on the firm they wish to look after their affairs, where strengths and weaknesses can be clearly identified, and ethics and values are reflected.
There can be no argument that the creation of such a clearly defined brand message is easier in the restricted world. Restriction results in brand empowerment. After all the high end of the wealth management and private banking market, where most aspirational clients have always wanted to ultimately find themselves, has always been restricted and our target clients understand that culture.
Clients have always asked: ‘tell me a little bit about your company.’ Having a restricted model makes the question easier to answer. So, in theory, having a restricted model should make the marketing of a client proposition more simple. But herein lies the rub.
Rules require, quite rightly, that regulatory status is clearly identified, that a firm following a model defined as restricted must clearly present itself as offering and delivering ‘restricted advice’. Independent sounds cool, while restricted is such an ugly term.
The decision to follow a restricted model delivers so many plus points, such as the ability to provide a clear, deliverable client proposition, a defined adviser proposition (essential for organisations wishing to recruit and retain quality advisers), strong compliance guidelines and administrative processes, controlled costs, and the potential to build real corporate and brand identity.
All of these are real and the necessity to continually justify and explain and describe the rationale and style of restriction to those who have historically been told that only ‘independent advice is good advice’ is a real challenge.
The nonsense that independence is the ‘gold standard’ will dissipate in time as advisers and firms realise that their professionalism need not be defined by their ability or desire to do everything with everyone and that we now have the luxury, as a result of RDR, of just being allowed to be ‘good’ (a luxury long enjoyed by solicitors, accountants, stockbrokers, discretionary fund managers and the private banks). It is my belief that what is currently identified as restricted will become the norm.
However we live in the here and now, and everything is still a bit new.
‘Restriction’ is, for many, a new concept, something which did not really need explaining before but does now, and something that needs explaining raises questions which need answering. The burden of reinforcement layers additional marketing burdens on restricted firms. Effective marketing is a full-time job, requires a specific skill set, can be hugely expensive and is something which tests even the larger firms.
Luckily and rather surprisingly, those advisers working alongside solicitors in the professional market have found an ally in the Solicitors’ Regulation Authority. The SRA was visionary in its understanding of the advisory space, realising early that independence did not necessarily signify quality and that legal firms should exercise their discretion in identifying advisers best able to deliver desired outcomes. This has offered restricted firms an enormous opportunity to perform, with defined proposition and process a useful tool in aiding solicitors in their necessary due diligence.
Having said that, the marketing of private client financial planning has never been easily or cheaply achieved and this will, I believe, forever be the case. As a sector we provide something that has been tarnished and the consumer is justifiably nervous. In my mind the adoption of a restricted model creates superb marketing opportunities for those with the ability, talent, resources and positioning to communicate a defined, client-centric proposition. That is ultimately what clients want – an advisory firm that they understand and where they know what they are getting which clearly reflects their needs. That is not to say that this is impossible to achieve for the independent sector, but I believe that it is much harder.
The challenge is that the UK market needs to get used to hearing and getting used to that ugly word. That is going to take some time and some effort.
Giles Cross is head of marketing for Sanlam UK
Key points
Irrespective of the decision of which way to go, independent or restricted, nothing seems to have changed and the noise has died down
The creation of a clearly defined brand message is easier in the restricted world
