The state of independence

The RDR was supposed to herald a huge advance in advice, and was going to drive the change from financial planning being an occupation to a profession. To be fair it has; it has just made that professional advice inaccessible to about 95 per cent of its potential market in the process.

And while the masses have been frozen out of advice, advisers themselves (admittedly with some help from the government, regulator and the trade press) have been tying themselves up in knots, quibbling around semantic points about which most of the public could not care less.

The pension freedoms should have been – and still could be – an opportunity for financial planning to re-establish a foothold with potential clients.

But instead of exploiting the possibilities we have all been pre-occupied with an ongoing debate as to the underlying differences between what constitutes ‘advice’ and ‘guidance’.

This debate on semantics is a distraction to what advisers could be doing to provide a better service and offer demonstrable value

I know this matters, but I have to tell you that, to most of the general public, it really doesn’t. The distinction between ‘advice’ and ‘guidance’ is one no consumer can be bothered making. To the masses the two terms are as interchangeable as, I don’t know, ‘occupation’ and ‘profession’.

This debate on semantics is a distraction to what advisers could be doing to provide a better service and offer demonstrable value.

The advice gap has continued to grow, and will continue to grow further as long as we as an industry are too busy with these navel-gazing irrelevances, thinking about tiny details that matter to us, rather than the big issues that matter to consumers.

Against this backdrop, the banks currently returning to advice do not (or should not) represent a threat to independent advisers, but instead a safety net to rescue those millions that those advisers have shown no interest in servicing.

Bank advice is almost certainly not as good as independent advice, but it is also almost certainly better than no advice at all and that is the choice most people are faced with.

If banks returning to advice demonstrates the RDR has failed, then advisers must take at least part of the blame for that failure.

But I do not yet think it has failed. Rather, the changes we are currently seeing in the marketplace merely represent everything settling down into something workable for and sustainable after the RDR shook it all up.

The recent high profile acquisitions by Standard Life-owned 1825, do not represent anything more significant than that either, but a handful of champions of the independent model apparently abandoning their principles to go restricted have prompted more rabid noise about independence’s death.

Carl Lamb, managing director of one of the acquired firms in Almary Green, has even seen the need to defend himself against ludicrous accusations of “selling his soul” following the deal.

The thing is, Almary Green’s existing clients will continue to receive a level of service that Mr Lamb is happy with.

Not one is going to be destitute within months as a result of the move, and most probably won’t even notice any change. If they are worried, there are several other advisers operating on an independent basis they can take their business to instead. However, as 1825 has probably guessed, they almost certainly won’t because they don’t care.

Again it comes down to a debate about words. And again, most of the public is not bothered. Advisers place great importance on the label because ‘independent’ sounds so much better than ‘restricted’.

But when you get past the dictionary definition to what they mean in this context, a restricted offering is more than adequate for millions of investors.

I have often heard doctors used as an analogy. A brain surgeon is not referred to as restricted just because he can’t do dentistry. I often wonder whether advisers would be more comfortable with the restricted model if it were rebranded as ‘specialist’.

Even if it were, I suspect it would have little impact on the perceptions of the public. Most people don’t bother with the status of their adviser, judging them instead on the service they provide, not the label they use.

St James’s Place is often derided as a terrible business, but notably it is always other advisers that criticise it, not its growing number of clients, who seem more than happy with the service they receive.

There should always be a market for the excellence that true independence represents, but for many – probably most – a ‘good enough’ solution is more realistic.

I have been a long-term advocate of the independent model and I still believe that independent, fee-based advice is the best solution for those willing or able to pay for it. I would love that independence to be the aspiration for all advisers. But it is becoming clear that focusing solely on that has left millions with no advice at all.