The Retail Distribution Review 10 years ago saw the financial services market split into two, according to John Cowan, interim chief executive officer at Sesame Bankhall Group.
Speaking on the CEO panel at the Dynamic Planner conference yesterday (February 7), Cowan discussed some of the opportunities the industry is likely to see, moving from RDR to consumer duty.
He said: “Consumer duty is going to bring challenges and opportunities and in my mind, RDR broke the financial services community into two: the mortgage brokers and financial planners.”
Cowan explained that financial planners are building asset values for people but the mortgage market is working in transactions.
“Foreseeable harm in the consumer duty is a simple wake up call to any mortgage broker in the country,” he said.
“Many claim they talk to a client about protection but most clients walk out the door without any conversation because the broker doesn’t have time or can’t be bothered.
“So the opportunity and obligation for a mortgage broker to open up a conversation about protection, which they should have been doing anyway, will be more evident. I see that as a big opportunity for brokers.”
Cowan added that all financial services firms need to go back and “take a good look at themselves” as while many state they are already abiding by treating customers fairly, “there are bigger challenges coming down the road”.
Likewise, Stephen Gazard, CEO of Quilter Financial Planning said the duty presents an opportunity to change the model.
We’re in a world where it is far easier for an 18 or 25 year-old to invest in crypto than it is to get pension advice. That cannot be right. Andy Thompson, Solomon Capital Holdings“There's a huge amount we do to protect the adviser and ourselves and the consumer duty provides that dynamic to move away from that risk environment that's driven us."
Time for change
Discussing how people’s plans have changed over time, Gazard said we are in an age of acceleration.
“The speed with which it's changing around us is at a much greater pace,” he said. “The role of the adviser is to fully embed themselves with the client.
“I think we have become far more reactive to the needs of the clients, rather than ultimately delivering what we think clients want.
“Actually understanding directly from the client, rather than what we think they need from us, is the change.”
Additionally, the big difference now, compared to 2008, is that the advice given is a lot more sophisticated.
Ben Goss, CEO of Dynamic Planner, said: “It’s genuine thinking in globally diversified risk managed portfolios. And the answer is if you've got a long term plan, you’re fine.”
Goss said when clients are concerned during uncertain times, the conversations are very different.
“[Often as an adviser you’ll say], ‘when we got together, we talked about the fact that things go up and they go down. We talked about the fact that there are crises - there do seem to be more crises, and more frequently these days, but look, you’re on track’,” he said.
“That is a very different from the answer you might have gotten certainly 20 years ago.”
Technology could be the change
Andy Thompson, CEO at Solomon Capital Holdings, said many current advisers began their careers with selling products to young people for commission.
“Guess what, are a lot of those young people cursing you today for that? No they're not, they’re very happy, and although we're not getting back to that, we do need to get back to a way of supporting them.
“We’re in a world where it is far easier for an 18 or 25 year-old to invest in crypto than it is to get pension advice. That cannot be right.
"If you bring technology in, that does reduce the costs of delivering advice and can bring in more people.”
He explained that the current environment really demonstrates the importance of financial planning rather than transactional advice.
"Reassurance is not a once a year check in, and there is a big dichotomy between what a client is getting from a D2C versus an adviser,” he said.
He argued that if advisers use more technology, clients can benefit.
Likewise, Cowan said greater technology adoption was needed.
Cowan said: "People's experience of life is very digital and it's fair to say financial advice is far behind the consumer experience.
"Consumers expect things to be delivered in an immediate way. Things taking four weeks will no longer be good enough."
Elsewhere, Goss explained while there is a need for technology, there has been a shift.
He said there was a time when technology was looked on as the answer and while it can do the “heavy lifting”, it is no substitute for an experienced professional.
"The role of the adviser is to listen, understand, empathise and help,” he said.
“Advice since the global financial crisis has become more sophisticated and we cannot underestimate the challenges."
sonia.rach@ft.com
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