Bailey Roberts Group director Ian Bailey argues that independent financial advisers must offer a sustainable value proposition in order to survive post-FoFA, and that direct management of client funds could be the solution.
There has been a lot of commentary recently about the future of independent advisers and how a sustainable business model will develop. As well as the economic environment over the past few years, FoFA legislation has changed the landscape – forcing a major rethink in how Independents position themselves in the market.
While many advisers are being integrated into the large dealer groups, others are struggling to offer a strong value proposition to their clients.
Much of the focus at the moment is around advice. While this is clearly important, we don’t believe advice alone offers a compelling differentiator from the larger groups.
Independence: it’s relative
While many advisers claim independence from the large groups, they are still using wrap accounts and platforms owned by product producers – and therefore offering their clients the same resources in terms of research, risk management and products as the dealer groups.
In reality, many of the so-called ‘independents’ have become sellers of a commoditised product. Not only does this mean that a clear value proposition is not being offered, it also exposes ‘independents’ to the risk that, as clients become more educated, the major selling point for them will be based on price. That makes building a sustainable business model difficult.
Managed funds: where is the value?
What is the value in putting client’s money into managed funds? Managed funds are a commoditised product, offering little or no performance differentiation over the market. Do clients see value in charging a 0.5-1% fee for advisers placing their funds with a manager? Can there be a sustainable business model around charging a fee for this?