Divergence

There is a movie in the cinemas at the moment called Divergence. I’ve not seen it yet, preferring to wait for these things to arrive on iTunes so I can watch them in the comfort of my living room, avoiding rip-off cinema prices, sticky seats and anti-social cinemagoers using mobile phones and generally provoking my anger.

But, my hatred of the modern cinema experience aside, this movie does look rather good. From what I can tell by watching the trailer, it tells the story of a fictional world divided by factions based on virtues. Our leading lady discovers she is ‘Divergent’ and won’t fit in, before uncovering a plot to destroy her type and embarking on a no doubt rip-roaring adventure to uncover the truth. Compelling viewing, indeed.

Hearing the news that Old Mutual Wealth has acquired Intrinsic made me think about this movie and divergence in general. Leaving aside the other question of who takes their turn to buy Positive Solutions next (please don’t let it be us), it does highlight how the distribution side of retail financial services is changing.

On the one hand we have networks of ‘advisers’ offering access to a fairly limited suite of financial products to their customers. News of the Intrinsic deal came littered with words like ‘first-class proposition’, ‘investment solution’ and ‘advice relationship fully aligned’. They also used the word ‘headcount’. If I’m ever part of an organisation concerned with its ‘headcount’, feel free to mount a bold rescue mission, even if the risk of casualties is unacceptably high.

On the other hand, we have real advisers and Financial Planners; typified by small or medium size firms, starting with the customer rather than the product, often independent and highly qualified.

What happened since the introduction of the Retail Distribution Review – and possibly starting long before the RDR was a seed in the soil of the FSA – is a case of divergence.

It is difficult to know whether real advisers and planners have diverged from networks, or vice-versa, but what we now appear to have is two distinct communities operating within the same space.

This is not necessarily a question of independent versus restricted, although restricted tends to better lend itself to the sales approach. It is also not a case of profitable versus loss-making, although the same application can often be observed.

This is a case of a cultural difference between firms that want to sell products, and be rewarded for doing so, and firms that want to sell advice. We have different virtues. Both approaches are equally valid. The selling products thing only loses some validity when attempts are made to dress it up as advice.

Assuming all things in life turn out like big-budget Hollywood movies – and in my experience they often do – my next blog will explain that I have uncovered a plot to destroy advisers and must find out what makes us so dangerous before it’s too late. But that sort of thing could never happen. Could it?