Mattioli deal sparks fresh suitability concerns

Mattioli deal sparks fresh suitability concerns

The rise of one-stop-shop firms that offer investment management, platforms and financial advice could result in poor outcomes for clients, advisers have warned.

Companies that offer financial advice in addition to other services, such as investment management - known as 'vertically integrated' - have been accused by independent financial advisers of pushing their own products.

Scott Gallacher, director at Leicester-based Rowley Turton, said that he was “sceptical” that the recent deal by advice and self-invested personal pension firm Mattioli Woods to buy a stake in investment manager Amati would be good for consumers.

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He raised concerns such deals could encourage in-house advisers to recommend the firm’s own funds.

“As a committed independent financial adviser I would rather providers stick to providing products and leave advice to IFAs. 

“IFAs are able to source and recommend the most cost effective solution for their clients regardless of their circumstances. Whether vertically integrated firms could be accused of shoe horning their clients into the firm's in house proposition.”

Mattioli Woods chief financial officer Nathan Imlach defended the structure, calling client outcomes the "whole rationale" of having a number of financial products under one firm.

He emphasised that Mattioli Woods advisers often recommend products from third-party companies and that an in-house bias would not exist.

"That's not going to happen. The whole rationale around vertical integration is to better the client outcome by delivering what they client needs," Mr Imlach said. 

EQ Investors director of communications Ben Faulkner said that vertically integrated firms create the risk the firms will prioritise profits over the best outcomes for clients.

“The suspicion however is that the acquisition companies are more interested in maximising the revenue per client and conflicts of interest may occur. Promoting and pushing clients into in-house products is the big concern.”

Francis Klonowski, principle at Northumberland-based Klonowski & Co, said the personal relationship advisers can develop with their individual clients over many years cannot be replicated by a large company.

“I’ve often heard people talk about ‘scale’, but for financial planning - real financial planning, I mean, not planning dressed up as investment management - large scale doesn’t work. It’s that personal, one-to-one, tailored, service that clients really appreciate.”

However, David Hearne, wealth management adviser at Satis Asset Management, said that advisers should pay less attention what big firms are doing and instead focus on delivering the best outcomes to clients.

IFAs could harness the difference in services to demonstrate the advantages of bespoke advice, he added.

“I think advisers should be less concerned about what other firms do and focus on their own businesses and clients.

“Advisers in small, local or niche firms may even find it easier to differentiate themselves if we see more vertically integrated firms in the market, much in the way many IFAs used to differentiate from the prevalence of bank advisers.