- 73 per cent of advisers intend to remain independent
- Advisers welcome the end of ‘commission clubs’
- Industry confidence in rules for depolarisation is poor
- Banks offering multi-ties is a worry for advisers
The latest study by Sesame, the UK’s leading provider of support services to financial advisers, found that while independence is clearly the most popular option, the multi-tie model is not being dismissed altogether. The menu of charges was branded misleading and confusing by advisers.
The Sesame IFA Barometer, an ongoing study of a representative sample of Sesame members, which examines the key issues facing advisers in the current climate, also found that while nearly three quarters (73%) of advisers said they had no plans to go down the multi-tie route, just under one in five (18%) were undecided and almost one in ten (9%) actually welcomed the multi-tie model.
More than a commission club
Advisers are however seeing multi-tie as bringing more to their business than simply better rates of commission and are showing faith in the benefits that depolarisation will bring to them and their clients, a view endorsed when more than a third (36%) said they saw multi-tie as providing more than an ‘enhanced commission club’.
Advisers are split down the middle on the benefits of multi-tie with 36% believing they will be nothing more than an enhanced commission club. However an almost identical number (37%) disagree, highlighting an expectation among advisers that this new advice model will offer new features beyond enhanced commission. This is likely to be one of the key battlegrounds that could ultimately define the long-term success of multi-tie as propositions are launched over the coming months.
Burden of regulation
Advisers remain sceptical about the value of the FSA’s Key Facts documents, which could be bad news for the City regulator with the implementation date for depolarisation imminent. Nearly a third of advisers (30%) said the documents provided little real opportunity to highlight why independent advice was best.
43 per cent of advisers believe the FSA’s menu is unhelpful and unclear. But a quarter were more receptive to the idea with 28 per cent finding them helpful.
Impact on the business model
The research found advisers are still unclear about the impact depolarisation will to have on their business. Perhaps because the menu has not yet been widely introduced and no one has announced their multi-tie proposition, so advisers have no basis on which to judge the real impact of the new regime. Only four per cent felt strongly that depolarisation would allow their business to grow more successfully. Furthermore only five per cent said the new regime would encourage more people to take control of their finances.
Will the banks steal a march?
Threats from new competitors continued to be an important issue for advisers with just over a third (34%) saying they were concerned about the impact that banks offering multi-ties would have on their business.
Furthermore, less than one in five (19%) advisers surveyed felt that depolarisation would help ensuring the value of solid financial advice was recognised by the community.
Key findings
- 31 per cent of advisers have little faith in the FSA’s Key Facts documents.
- Female advisers are more optimistic when it comes to the impact that depolarisation will have on people seeking financial advice. Nearly half (49%) of male advisers disagreed that more people would be more confident about seeking advice compared to 20 per cent of female advisers.
- 34 per cent of female advisers felt that depolarisation would ensure the value of financial advice was fully recognised compared to just 20 per cent of male advisers.
- A third (29%) of female advisers said depolarisation could positively influence the growth of their business compared to only 15 per cent of male advisers.
- Advisers in the Midlands are the least optimistic when it comes to the extent to which depolarisation will allow them to successfully grow their business. Eight per cent of advisers in the Midlands do not believe that depolarisation will enable them to grow their business, compared to 19 per cent in the North and 18 per cent in the South.
Charles Bryant, Sesame Commercial Director, said:
“The resolve of advisers is once again being tested and they clearly have some serious decisions to make. These research findings highlight the road still to be travelled before advisers fully embrace depolarisation. I personally think depolarisation is about far more than just multi-ties but the jury is still out on how IFAs will react to the new regime. In time advisers have no choice but to take on depolarisation – it is just a question of when and what route they take.
“The reality is many advisers are still looking for guidance and are very open-minded so they can assess the impact and opportunities, enabling them to make an informed decision about their future strategy. While it is up to each advisory firm to choose the model that best suits their clients and business, networks have an important role to play at this time in supporting advisers in their choice. But it is our job to ensure we provide a compelling proposition to make those choices worthwhile.
“From these latest findings, the independent model continues to prove the most attractive to IFAs, with the multi-tie model attracting increasing interest from advisers. IFAs must assess the needs of their clients before deciding on the most appropriate route for their business. Sesame will provide the choices our customers are looking for and will certainly not be imposing a one-size-fits-all solution in the way some other service providers undoubtedly will.
“Ultimately depolarisation is about consumer choice and disclosure, not independent status versus multi-ties. Every adviser, regardless of what model they choose, will have to change the way they do business but no doubt what will emerge is a more streamlined industry with a greater focus on the value of quality professional advice.
