OpinionNov 16 2015

Why restricted advisers are far from being the best

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Many advisers have gone restricted in the belief that this can offer reduced costs and allow them to retain more of the overall client fee in house.

While this could be considered good news from a value for money perspective, many consumers are wary of any form of restriction and the fundamental values and benefits of independent financial advice are essential to them.

Investors deserve an adviser who selects the best ideas from across the whole of the market and puts client service and value ahead of corporate profitability.

Despite what appears to be current industry consensus, achieving rapid growth while retaining independent status through economies of scale, value for money, client fees and healthy corporate margins is still possible without switching to a restricted model.

Many financial advisers tend to make the advice process overly complicated when all clients want is reassurance that their savings are invested in the right places at the right times.

Clients want advice on the use of available tax advantageous investments and strategies to minimise tax liability, peace of mind that any unforeseen financial catastrophes are covered by the right insurance products, and transparency of fees and charges paid.

While independent financial advisers can fully achieve these objectives, the same cannot always be said for restricted advisers.  

Restricted advice offerings are often difficult to understand in comparison to more transparent IFA charging structures.

As a result, a large number of different charging models does not make it easy for clients to assess the real cost difference between restricted and independent advice.

The need for advice normally increases in line with age and portfolio value. As individuals move through life, their circumstances become more complex and this equates to an increasing value of assets available for investment.

The ability to select the right investments and the relating tax efficiencies from across the market is key.

The financial needs of younger clients with lower savings and pension values significantly differ and they may not always get best value for money in respect of the fees required for access to a full adviser service proposition.

IFAs can offer better alternatives including access to a fully independent investment proposition at a lower fee rate, tailored so the client receives the appropriate amount of face to face advice which fits their portfolio needs and the fees they expect to pay.

It is critical that the industry continues to offer a wide range of financial advice propositions, from the highly bespoke to the digitally versatile, on an independent basis.

In the face of a growing restricted advice market, IFAs must continue to grow their businesses in order to extend the provision of independent financial advice to clients across the UK.

The challenge that IFAs currently face is to combining the ‘new model adviser’ investment and advice proposition, supported by large firm operational efficiencies, whilst maintaining those traditional client relationships.

Pat O’Hara is managing director of Ascot Lloyd.