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The myth of expensive Independence
Every other marketing email we receive at the present time appears to be from some industry pundit purporting to represent one of the current slew of 'consolidators' - firms that wish to buy the practices from disconsolate IFAs who don't see themselves being part of an RDR-future.
After a little while, it becomes a little tedious to be continually told that the RDR world will simply be too expensive for the delivery of decent independent advice to 'normal' clients (ie. those without exceptionally deep pockets, who can afford to prop up the lavish lifestyles of self-appointed 'wealth-managers'). And, after a little more reflection, it seems disappointing to see the speed with which an increasing number of traditional IFA networks appear to be relinquishing their independent status, in favour of the restricted advice model.
I have wondered, at intervals, what it is precisely which makes 'RDR-World' too expensive for the provision of independent advice to anyone other than celebrities or professional footballers, or indeed what it is which makes the rest of us less deserving of a genuinely impartial advisory service. It is not exactly as if this model for advice has been 'cheap' over the last decade or so, is it? As if regulation itself had not in itself been a fiendishly expensive experiment, IFA's themselves have (apparently) fallen over each other to flog toxic investment funds to entirely inappropriate clients, and then appeared aggrieved and petulant when the chickens (inevitably) came home to roost.
Part of the answer (for the movement away from independence) is that the introduction of 'Adviser Charging' does raise the prospect of the IFA having to jump through some more onerous hoops if he or she is to maintain their standard of living - perhaps restricted advice will supply an easier time of it for the indolent rich in our profession. Perhaps another part of the answer is to be found in the requirement that we will have to justify our annual (recurring) revenue streams? Clearly, a restricted advice model might well require an adviser to do rather less than the equivalent independent practitioner to earn those renewals, as there is less that he or she can do.
Operating as an independent financial adviser has always been a challenging vocation. Most practitioners that I have worked with over the years have pursued this route, not because it earned them the big bucks, but rather out of conviction because they felt that, in an imperfect world, it delivered the best likelihood of a decent outcome for the client. Perhaps the unnecessary complexities of failed investment products have undermined in some minds the possibility of decent outcomes? Perhaps it's not just the cost, but the fact that the RDR requires us to remodel our business propositions to such a degree? Or perhaps we are losing the habit of allowing our practices to be driven by conviction - the long-term effect of regulation is to erode the very concepts of professionalism and vocation.
[P.S. At the risk of appearing somewhat un-trendy and unhip, ValidPath wish to categorically confirm that we remain firmly-wedded to the independent advice model.]
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Kevin Moss, 12/01/2012 |
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