It all started so well and with the very best of intentions, writes Tim Sargisson in his latest column for PA, which details the struggles of obtaining information from a number of providers…
In 1988, the Financial Services regulator introduced rules that advisers either had to be classified as 'independent' or 'tied'.
Tied advisers were typically associated with an institution such as a bank or insurance company whose products they would be likely to recommend. As an independent adviser there was a sense of pride associated with offering ‘best advice' across a wide range of companies to clients.
I well remember those early years. Moseying across Finsbury Square en route to The Brewery to hear the latest presentation by a well-heeled fund management group. Maybe Mercury Asset Management?
The sense of reassurance as Carol Galley and assorted investment specialists glided onto the stage to present their thoughts and views on investment markets, allowing you to return to the office fortified by a decent lunch and confident that you had identified the company to utilise your client's annual PEP allowance.
The following year maybe it was the turn of Save & Prosper, Kleinwort Benson, or Morgan Grenfell - same routine, same result. Over the years your clients built up an impressive, diversified portfolio of funds across a range of companies distinguished by your independence that permitted this approach.
Wind the clock forward to today and the challenge in recent years has been to transform that collection of policies and products into a financial plan. However, the arrival of Covid-19 has shown how increasingly challenging this process has become.
Until a few years ago this was fairly straightforward. By now most advisers employed administrators to undertake the tedious part of obtaining valuations - details of unit holdings, unit prices, that sort of thing to allow a valuation to be produced.
While the struggle continues to obtain details from companies that are long gone, such as those highlighted above, the advent of MiFID II cost and charges disclosure, as well as product guidance and suitability, has added layers of complexity to an arcane process.
The arrival of Covid-19 has left some advisers struggling to get basic details from providers. The more diverse the range of products and funds that a client holds the harder it is to deliver against the regulatory requirements, hence the curse of Covid.
We have reached this position because the big providers with the deep pockets fail to invest sufficiently in upgrading their back-office systems. The focus and effort is still on attracting new business in the quest for new assets.
As well, the owners of firms with a high proportion of legacy products have no need to go to any expense in providing adequate support to IFAs. Because when it comes to undertaking a cost benefit analysis, this particular cost is of zero benefit to the owners of these businesses.
The 2020 AKG research paper Future of Advice asked the question; what development within your business has done or could do most to create required time/cost efficiencies?
Nearly 60% of advisers replied it was better use of back office capability. No s**t, Sherlock! However, do IFAs still seriously believe that integrating a range of investments across multiple platforms with legacy assets to produce a MiFID II compliant cost and charges statement is going to be aided by better back office capability?
After all these years we've seen precious little progress of note in this area. I've talked to enough advisers in recent months who share the frustrations that a cost and charges document is only as good as its weakest link. I'm afraid that no improvement of back office capability is going to improve things if the only way you can get a valuation from The Crimson Permanent Assurance is to sit on the phone for seven hours.
Being independent starts with your own business. The Covid-19 pandemic highlights that the definition of being independent has moved on. Fundamentally any solution must work first for the adviser, and your business. In times of crises, be that a market shakedown, or the death of a client, your access to critical information is what will set your service apart.
This underpins the need to remain independent of firms that don't support your need for a ‘soup to nuts' technology solution. Covid-19 shows the need to have a grown-up conversation with clients about moving assets to firms that support the efficiencies in your business.
These are the efficiencies that will allow you to survive and prosper. Only then will you truly see the essential better use of back office capability.
Tim Sargisson is chief executive at Sandringham Financial Partners
Former IFA charged
Could drive down fees
PA's weekly bulletin
Moola made £1.3m loss before sale
Meeting MiFID II requirements
Former IFA charged
Could drive down fees
Increase of £227.6bn at the same point last year