A wiser man than I said that “Advisers need funds, insurance plans, platforms and many other products…. Being brutal, I can see funds and insurers surviving without IFAs ….. IFAs cannot survive without providers.”
Being equally brutal, if they could have done without us, they would already have done so. They can’t, so they haven’t and they won’t. They need us more than we need them.
Let’s look at why:
The world has changed. Importantly, we need to be aware that RDR, TCF and other regulatory initiatives are a symptom of these changes, not the cause.
There are two main, interacting drivers going on:
1. We live in a world of Consumer Power. That much is a cliché. We can buy anything from anywhere at anytime. And it’s amazing.
But as the sheer number of phone calls and emails trying to scam us demonstrates, we live in a world where the fences are down, and Big Brother is powerless to do anything to help until the horse has bolted.. There are always trade offs, but is this one we are comfortable with? Who amongst us does NOT know someone who has been the victim of a telephone scam? How many of your emails are ‘phishing’ scams?
What is infuriating is that two cases I know about, the victim was warned that a particular interaction was a scam part way through the process, but preferred to trust the voice on the phone, rather than those around them such as family and friends. They are now naturally very, very wary.
So it seems that one unintended consequence of all this consumer power is that we are more vulnerable, and there is less protection than there was when we had a more ‘top down’ paternalistic system. We must learn to look after ourselves.
So we withdraw from doing business over the phone. We distrust emails. We value the face to face even more, especially when we know the people concerned.
2. The rise and rise of the internet. Again, a cliché, but where once the book ‘The World is flat’ by Thomas Friedman was almost Science Fiction. It’s now a simple description of the world we live in. It was published in 2004. The YouTube presentation “Shift Happens” has to be constantly updated – real life runs ahead of the already scary numbers in the (geographically challenged!) original.
So anything you know, your client can know in 20 minutes. We were once the gatekeepers to knowledge – not any more. So the value in the role of the adviser / broker / salesperson has shifted. Away from Distribution and towards the Trusted Adviser role.
So far, so good – we all know this.
So back to the initial premise:
All the above has moved us from a Top Down world where Wholesale (Funds) distribute to Retail (Providers) who distribute through Intermediaries (IFAs) who sell to real people – Clients.
And the past is full of failed attempts by Retail to bypass the Intermediary. These have included Appointed Reps. Online marketing. Direct Sales. ‘Accidentally’ writing to the clients. (which still goes on of course– did anyone mention Standard Life?) And we can recall the financial disasters that all these attempts actually were in real life. Frankly, the Providers HAVE tried to do without us. And repeatedly failed.
In the new, bottom up world we now live in, Clients have relationships with Trusted Advisers, who use technology to minimise their and their clients exposure to the machinations of the ever more distressed Retail sector, using technology to access the Wholesale sector as easily and cheaply as possible.
In turn, the wholesale sector designs funds and services for ‘Intermediaries’, not Clients.
The Retail sector looks ever more irrelevant. In a post RDR, open architecture world, these firms can only compete on service standards and the quality of their administration. No, really. Stop laughing there at the back. No wonder we are seeing the rise and rise of Platforms. And this will continue.
But this sector will not go quietly into that dark night. It keeps casting around for a role. One of these roles is that it has appointed to itself is the provider of business and commercial advice to Advisers. It would be funny if it was not true…..
So no. Actually we don’t need Providers and funds. At least, not all of them. Why do we need 40 000 funds? And the ones we do need do not have to be based in the UK either.
The World is Flat asserts that anything that can be outsourced, will be outsourced to places such as India, South Africa and China. Administration can be. Fund Management can be. The Client relationships that we (Planners and Advisers) have built can’t (easily) be outsourced. Remember the issues about email and telephone scams and degradation of trust we mentioned earlier?
So I have a vital question for all you Product Providers and Fund Administrators……
…… How is your spoken Mandarin these days?