At the Pensions Network for the last 24 hours. Extremely clever and thoughtful DWP civil servant, Charlotte Clark, made an excellent presentation titled “Have Pensions Ever Been More Interesting?”, and I think the answer quite genuinely is probably “No.”
My good friend and fairly regular client Alastair Conway, now CEO at James Hay, made another very good presentation about how a platform business like his can evolve to work effectively in a world where – as demonstrated by the research in Holly Mackay’s and my Platforum D2C reports – the large majority of consumers who take financial advice go in for some execution-only, non-advised activity as well.
Alastair kindly gave our research several very convincing plugs, and more importantly made it clear that it had greatly influenced his thinking on the James Hay development strategy. But I was interested to notice that in one key respect, he had interpreted the research very differently from me.
The way he imagined things, the adviser is in charge of the situation. The adviser maintains a close and continuing relationship with the client, and takes the initiative when there’s anything important to discuss or decide. But, recognising that in today’s world of adviser charging it’s not good value to spend two or three chargeable hours sorting out something fairly trivial like the client’s annual ISA investment, the adviser politely stands aside and encourages the client to do this on a DIY basis.
I’m sure that’s sometimes exactly how it is, and it may be that in the world of ongoing adviser charging it’s like that slightly more often than it used to be. But much more often, I don’t think it has been like that at all. The overwhelming majority of IFAs – not all, but the overwhelming majority – have been sales-driven product-pushers with very little interest in maintaining client relationships unless they’re sure that more initial and renewal commission are available in the near future. It’s therefore for the client to decide whether or not to involve the adviser in any forthcoming investment decision. If the client feels happy choosing an ISA without advice, then he or she will go ahead on an execution-only basis. If the client does feel the need for advice, then he or she will call in the adviser, at the cost of 3% initial and 50 bps trail commission taken out of the investment.
The move from commission to adviser charging is supposed to be changing this sales-driven, commission-hunting approach. The main difference is that when advisers are involved, they’re not supposed to take an ongoing adviser charge in return for no ongoing service, as most have always done with trail commission. But I strongly suspect that among the majority of advisers, the resulting change in mind-set will happen very slowly, if at all.
Over the years, I’ve noticed on dozens if not hundreds of occasions that those on the industry side persist in what seems to me an entirely false and excessively rose-tinted picture of the typical relationship between adviser and client. (I do recognise that there are some, especially those involved high net worth clients and advisers providing a true financial planning service, where a certain amount of rose-tinting is justified.) Nothing highlights these false perceptions better than the often-expressed idea that it’s the adviser who “owns” the client. Most of the time, this is totally wrong. The client owns the client. And, especially in the post-RDR adviser charging world, more often than not the client “owns” the adviser too.