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.
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.
So at the risk of oversimplifying things, I have to wonder about these two stories as an indicator of Aegon’s and by association other providers’ priorities. They are putting money into D2C and pulling it out of their adviser relationships. Make of that what you will.
Another common misconception I hear about D2C is that it is a solution for the advice gap. In fact, I’ve heard it said that D2C platforms are instead much more appealing to high-end investors who are more likely to have some idea of what they want to do with their money than Joe Shmo from Rotherham (no offense Joe).
And in other news...
There was, as usual, much discussion of the shape of advisers’ businesses in the near future.
FTAdviser sister publication Financial Adviser reported how large insurers have poured “vast sums” into their platform businesses to survive post-RDR. A report, by Cazalet Consulting, revealed that life firms Axa and Standard Life had achieved roughly the same level of assets (£19.7bn) as the three independent providers Nucleus, Ascentric and Transact (£21.7bn)
Discouraging news for those of you looking to sell also came to light this week when the managing director of consultancy Harrison Spence claimed that the sale value of adviser firms had fallen by 40 per cent in the past two years.
Brian Spence claimed that although buyers were willing to pay four times a firm’s annual revenue two years ago, a figure of twice annual turnover is now looking more realistic.
Finally, a new website has launched aimed specifically at advisers who might be looking for new jobs while not wanting to alert their current employers.
Founder Steve Hagues said wagechecker.com seeks to provide financial services professionals with a benchmark wage for the role they are currently fulfilling, and to put them in touch with prospective employers that might be willing to pay more for their skills.
