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.
This could be tricky in light of the government’s recent ban on consultancy charging, which would have allowed some of the cost to be passed onto the employer. “They can’t pass on the cost to individuals but employers have still got to do the work and they have got to have the knowledge to do it,” he explained.
Secondly, advisers face the challenge of selling the benefits of pensions advice to employees who have to pay for it out of their own pockets. Prior to the RDR much of this financial advice and education would have been paid for out of commission received by advisers setting up group personal pensions. He said: “It does create opportunities for workplace marketing. Once the scheme is in place the cost of advice can’t be passed on to members, but members can get access to advice if they want to pay for it. That is an opportunity for advisers as well.”
Last year the group launched an auto-enrolment support service targeted at small and medium-sized enterprises called Tenet Employee Benefits Solutions.
When asked whether advisers struggling with the financial implications of the RDR would still be able to find the cash to belong to networks such as Tenet, Mr O’Brien said: “There is no doubt that there will be some fallout from this in as much as there will be some firms so entrenched in what they have done in the past that they have been unable to make the emotional change and they are unable to sell their services to clients. That is more to do with their business model and their capabilities rather than the fact that the opportunity isn’t there.”
Mr O’Brien also said that the number of advisers with Tenet Group had increased by 10 per cent at the beginning of the year when compared with the previous year.
So, why would advisers choose networks such as Tenet over less costly service support organisations? Mr O’Brien said the network’s approach addresses regulation head on and is based on a thorough understanding of its members’ businesses.
“If an adviser is not doing something they should do, then it’s not a question of saying, ‘We would advise you to do…’, it is about saying, ‘You are going to have to because otherwise you are not going to write business going forward because we are not going to allow you to be authorised’.”
Nicola Sullivan is a freelance journalist
CV: Mike O’Brien
2012-present – Tenet Group, group brands director
2010-2012 – Tenet Group, managing director of Tenet Connect and Tenet Select
2009-2010 –Tenet Group, programme director
2009-2010 – Solvins, co-founder and independent consultant
2005-2009 – Cielo Capital Management, chief operating officer
2005-2006 – MAAS, chief executive officer
1994-2002 – NatWest Life, senior project manager
