Standard Life’s incursion into financial advice is a “real vote of confidence” in the sector and shows the scale of opportunity presented by the upcoming pensions reforms.
That was the view of industry voices canvassed by Investment Adviser last week after the financial services giant revealed it was buying IFA firm Pearson Jones ahead of the launch of a nationwide restricted advice service.
“The interesting thing is it is a real vote of confidence in the advice sector,” said Mick McAteer, director of the Financial Inclusion Centre.
“It signifies that the big boys are saying there is a real market there. Increasingly, consumers need more advice, not less.”
He said some had predicted that 2013’s RDR – which reformed the way financial advisers charged for advice – would see the advice sector “killed off” because of the onerous nature of its new rules.
“But now there is a big demand for advice,” he said.
Standard Life, which claims to have six million customers, said the scrapping of compulsory annuitisation in April would lead to “a generation of individuals that will see advice as an essential service”.
It predicted “demand for advice is likely to significantly exceed supply”.
The Edinburgh-based company previously owned stakes in advisory firms before selling out amid the chaos of the RDR, so its re-entry is a strong signal that big institutions are taking the changes to financial services seriously.
Other advisers voiced their agreement.
Clive Waller, managing director at CWC Research, said Standard Life’s move signalled an increasing shift towards major firms opting to offer ‘restricted’ advice and smaller adviser firms continuing to give whole-of-market ‘independent’ advice.
“Every major firm will be restricted,” he said.
However, he said the two types of entity could co-exist.
“I don’t think it is a threat to the IFA,” he said.
“The IFA market will shrink but there will be a good financial-planning market, which is healthy.”
By buying up advisers and launching a restricted service that has access to its wrap platform, Standard Life’s approach to breaking into the market follows the vertically integrated model Old Mutual has looked to build with its acquisition of Intrinsic.
Aj Somal, chartered financial planner at Aurora Financial Planning, said he was not surprised Standard Life had entered the restricted space and said he “expects to see other large firms follow suit”.
In spite of the much-publicised pension reforms, advisers had become increasingly worried that the hoped-for spike in demand for advice would not materialise, as many retirees would still opt for the safety of annuities or simply rely on the Money Advice Service for guidance.
Reservations over Standard Life’s move
In spite of the positive signal it sent about the future of the advice industry, some questioned how happy advisers currently using Standard Life’s platform would be about the firm’s plans to encroach on their turf.