However, my greatest concern is the implication that the value of advice is in activity or intermediation. There is a real risk of reverting to the product-centric view of the world that should have been left behind together with commissions.
No visible change does not mean a portfolio has not been monitored. No visible change does not mean alternate options have not been considered. No visible change does not mean the customer has not been reassured. No visible change does not mean the customer has not been advised.
If we focus purely on the transaction, then we risk holding back progress.
If product intermediation or trading activity is the sole source of value then why have US robo-firms reintroduced human advisers into the process?
In fact, behavioural science suggests that advising a customer to remain calm and sit tight through periods of market volatility is valuable advice. But valueless in terms of activity.
I really struggle to believe that there are a large number of platform customers paying ongoing adviser fees and not receiving any service from their adviser. If we look at the customer engagement regarding adviser fees over the past few years, it is difficult to envisage there could be any systemic issue here.
RDR ensured advised customers are made fully aware of the charges they pay for advice by introducing a new contract between the customer and the adviser through the adviser charge agreement.
The ‘sunset clause’ took effect on April 6 2016, effectively killing off any remaining commissions from mutual funds (except those governed by tax-wrapper rules such as pensions and bonds).
Mifid fee disclosures raised the profile of fees again in 2018.
The advice market and business models are constantly evolving. We have to prepare for the market of the future and be careful not to hold back change.
We’re already witnessing the emergence of hybrid models and it is vital that these new approaches are nurtured if we are to ever close the advice gap.
Even though an adviser might not regularly meet a customer or log activity on the platform, the customer may still benefit from the adviser’s service – for example, by using their online web services; receiving regular newsletters; and most probably by being invested in the adviser’s centralised investment proposition, and which the firm will review on a regular basis.
Although well intended, I think asking platform providers to interfere in the contractual agreements between customers and their adviser would create numerous challenges. In fact, new measures and practices may put us on a path riddled with unintended consequences that may divert the evolutionary course of the UK’s professional advice-based market.
