The Tenet Group faces a daunting task. Not only is it dealing with the challenge of ensuring its adviser members can remain competitive in a post-RDR environment, it is also operating amid increased scepticism about the relevance of networks. Many view these as overbearing and less cost-effective than support service firms.
However, according to Mike O’Brien, group brands director, the company is offering a lot of support.
Since Mr O’Brien first joined the group as RDR programme director for Tenet Connect and Tenet Select, preparing advisers for the changes has been a key priority. Tenet Group has addressed this by ensuring it offers robust support, education and training material to equip advisers for the daunting task of convincing people of the value of advice, which, in many circumstances, will cost them more.
Mr O’Brien said: “The biggest challenge for advisers is to be able to communicate their propositions to the end clients in a manner they understand and is transparent and seen as value for money. We are providing a lot of support in that respect in terms of holding a lot of seminars and providing a lot of classroom material to help people segment their client base and explain to customers what they get for their money.”
Advisers, said Mr O’Brien, need to strike the right balance between the amount their client is paying for advice and the advantages it is bringing them. In a post-RDR world for an initial round of advice clients can expect to pay roughly 3 per cent of the money they are investing in fees. He said: “If you are investing £10,000, 3 per cent is one thing, but if you are investing £1m 3 per cent is a hell of a lot more.” He added: “Where somebody is investing a lot of money, you would expect the adviser charges to be scaled back.”
There is no point, said Mr O’Brien, in providing an “enormous” amount of advice if the cost outweighs the benefit.
Mr O’Brien admitted that advisers who have had to switch from a commission-based business to a fees-based one would likely experience a “cash flow dip” in the first 18 months to three years. He did, however, point out that this loss could be offset by longer-term relationships with clients. “If advisers are providing an ongoing service (which they generally are because if not then they can’t charge for it) then they will have stickier businesses. They are building long-term relationships – it is not a hit and run.
“After all the pain of the RDR subsides there will be more robust businesses out there that can sustain a downturn because they are not reliant on the next sale or how the next year is going to go. They would have built up an income stream that will see them through the good and the bad.”
For advisers operating on the corporate side a two-pronged attack is required, said Mr O’Brien. First of all, advisers have to convince cost-conscious employers of the value of receiving support to comply with auto-enrolment and the pension reforms.