'Clients do not mind if an adviser is restricted or independent'

The chief executive of Quilter Financial Planning says clients are much more concerned about service, and ultimately outcomes, which could explain why nowadays the conversation has moved on to financial planning.

These days financial planning has become much more akin to life planning, he says, which is a trend he believes is set to continue.

Speaking to FTAdviser In Focus, Gazard explains what effect the RDR has had on financial advice, and how the industry has changed for larger firms.

As is often the case with large pieces of regulation, larger firms on the whole fared better.

FTA: How do you think the RDR project has gone overall?

SG: The RDR was one of the biggest shake-ups to the financial advice market in the UK ever.

While the actual mechanics of an adviser seeing a client and providing financial advice haven't necessarily changed, the advice given, the documentation required, and business practices have all been affected by the change in regulation.

The professionalisation of the industry that we have seen and the requirements that now need to be undertaken to provide financial advice have undoubtedly been a success and helped reinforce trust with the industry.

FTA: The past 10 years have seen more advisers opt for larger firms and networks, which has been partly attributed to the RDR and the higher cost of doing business. How has Quilter responded to that?

SG: A good example of the above is the change in adviser remuneration. The move away from commission-based remuneration models towards a fee-based model continues to make the profession very different from its previous iteration.

This required a significant change in business models for many firms and could potentially lead to a reduction in revenue for firms that were heavily reliant on commission-based income.

Similarly, the RDR introduced a requirement for financial advisers to hold a minimum level of qualifications and to maintain their knowledge and skills through ongoing training and professional development.

The many firms who were already serving the affluent market gained from the removal of bank advice as wealth advice became more limited.

While this is good for the industry, it represented a new cost for larger firms with more advisers, as many advisers had to undertake additional training and exams in order to comply with the new rules. This could be a challenge for firms, as it required a significant investment in training and development.

Ultimately, helping firms in their journey became a key requirement for us and helps to reiterate the support that networks can give advisers.

The RDR was such a big piece of legislation that we wanted to take as much of the heavy lifting away from the advisers as possible so that they could focus on implementing specific changes to their own businesses, while also continuing to give quality financial advice to clients with minimal disruption.

FTA: Which elements of your current business are directly related to the RDR and its new rules?

SG: The legacy of the RDR is apparent throughout our business in several ways.

This includes much greater standardisation of process, not least in the approach to providing investment advice. We have much greater investment in compliance, but often for better overall outcomes.

The pressure to improve efficiency and productivity, coupled with an expanding range of tools to meet the demands of modern financial planning clients has led to greater investment in and a growth in uptake of financial planning technology.

And finally, it would be remiss not to mention that the RDR prompted a trend towards consolidation of advice businesses, which we have seen evident within our network and is an area in which we’ve increased support for our appointed representatives.

FTA: What were the biggest challenges for large firms in implementing the RDR?

SG: The RDR created a shift in the tectonic plates of advice and most notably by effectively ending the bank advice model to the mass market.

However, the many firms who were already serving the affluent market and already on the journey towards RDR gained from the removal of bank advice as wealth advice became more limited.

In fact, as is often the case with large pieces of regulation, larger firms on the whole fared better given they had the resources to implement it well.

The consumer duty is one of the most important pieces of regulation since the RDR and will touch upon every aspect of an adviser’s business.

The RDR was introduced in a phased approach, with different aspects of the reforms coming into effect at different times, but it was still a huge change and firms needed to carefully manage the implementation process in order to ensure compliance with the new regulations.

Ultimately the advice profession has proven time and again to be highly resilient and adaptable, as was the case during the pandemic, and I’m confident it will emerge from the consumer duty even stronger.

FTA: How has the RDR changed what networks are looking for in their advisers?

SG: The RDR has helped change the culture of the financial advice industry for the better and it is like-minded advisers that networks will now be looking for in order for quality products and services to be disseminated to the end client.

We want to grow with our advisers and as such it is important to find advisers who have the ambition and appetite to provide quality financial advice.

As a network, we want to help underpin that ambition and as such it is about finding advisers who share this strategic outlook.

FTA: In recent years the debate seems to have shifted away from independent versus restricted advice and towards financial planning versus advice. Why is that?

SG: Our experience is that clients do not necessarily mind if an adviser is restricted or independent. What they do care about is the service provided and the outcomes that are achieved.

This is where holistic financial planning has come into things as the industry has moved away from being led by product.

Tax and estate planning has become a crucial part of the planning process and thus advice firms are looking to offer more than just the traditional investment advice and wrapper.

It made sense for larger firms, ourselves included, to launch adviser academies and help bring through that next wave of talent.

Financial planning has become much more akin to life planning, and this is likely to continue as a trend as people require advice at different points in their life.

We see it now with younger generations requiring much more transactional advice as they hit major points in their lives. As their finances become more complex, then the planning element will become much more visible in their engagements with an adviser.

FTA: Quilter, alongside SJP, was one of the first firms to recognise the need for adviser academies. What made you launch yours?

SG: One of the consequences of the implementation of RDR was that the number of advisers dropped dramatically. While the changes were largely very good for the industry, the Financial Services Authority estimated that the number of advisers dropped by as much as 20 per cent in the first year after the rules were brought in.

Since then, it has been imperative that adviser academies, such as the Quilter Financial Adviser School, help to boost the number of talented new financial advisers joining the industry and bridge the advice gap.

With training and development of existing advisers established following the introduction of the RDR, it made sense for larger firms, ourselves included, to launch adviser academies and help bring through that next wave of talent.

It is crucial that as advisers leave the industry, either via retirement or to do something else, we have a pipeline for the future and ensure that clients continue to receive the quality, professional financial advice they have come to expect.

FTA: We're about to see the launch of the consumer duty, but unlike the RDR, this is not focused on advisers only. What does the advice market need to take it to the next level?

SG: The consumer duty is one of the most important pieces of regulation since the RDR and will touch upon every aspect of an adviser’s business.

Many may feel like the onus is on product providers and the service and value that they offer, but the regulator will be keeping a keen eye on the advice market too.

Given the changes that came about from the RDR, advisers are already doing much of what the consumer duty requires. The key thing will be ensuring that their advice and investment processes and all communications to distinctly targeted client segments are designed to produce good customer outcomes and be prepared to evidence this.

Ensuring that every part of the business is geared towards the customer outcome will not only ensure good compliance for an adviser, but it will also result in good outcomes for the practice with closer client relationships and more opportunities to signpost the value of financial advice.

carmen.reichman@ft.com