Opinion  

Will inducement paper really stymie adviser education?

Michael Trudeau

Openwork’s Philip Martin raised an interesting argument about the fallout from the Financial Conduct Authority’s inducements paper this week, when he said it could damage advisers’ on-going education.

To put things in context, Mr Martin’s comments came as part of a story on how firms are leaning on the FCA’s inducements guidance as an excuse to cut costs.

The implications are that providers are being disingenuous: they’re saying they are being forced to cut these perks (including gifts, IT upgrades, certain joint marketing practices and - importantly - hospitality in certain circumstances) by the regulator when in fact they are all too eager to slice the associated costs without feeling like they’re losing a competitive edge.

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I’m not sure I totally buy it but for the purposes of looking at Mr Martin’s comments the providers’ motives are beside the point. The fact remains that these inducements are drying up, and that can, apparently, lead to poorly informed advisers.

So how does this stack up? The prospect is worrying of course. You don’t want to be fumbling around in the dark trying to satisfy a client’s best interests.

But how educational are these events? Surely if they draw in advisers they must have some benefit, right? But then again, it is understandable that the regulator is concerned with providers promoting their specific products. Is that really educational? Does it really help advisers make the best decision for clients or is it simply more misinformation?

What is worse for the client, an adviser being subjected to what amounts to commercial propaganda through the haze of cheap champagne, or an adviser who has refrained from attending these events and quietly done his or her own research and got on with the business of providing advice?

After all, how difficult is it to find educational tools? Do advisers need providers to lay on these educational seminars? Surely, surely the providers do it not because they have UK consumers’ best interest in mind, but because they think it is a good business decision?

These things are not cheap. If providers really expected no payoff for their buy-in would they still host these events?

Is online D2C a threat?

John Lappin had an interesting column this week in which he said advisers have nothing to fear from the tech-heavy direct-to-consumer sector.

I tend to agree, but I also like to play devil’s advocate. There are a few things that make me wonder if tech-based D2C solutions pose a threat to the current advised business model.

For example, Aegon this week came out saying its earnings were down because it had channelled funding into its D2C platform which is due to launch in the first half of this year.

That’s all fine, but then it later emerged that they are cutting commission on new entrants to auto-enrolment pensions set up pre-Retail Distribution Review because it is not commercially feasible.