In our competitive industry there has always been rivalry between different factions. Tied advice has gone head to head with independent – and any variation on that theme – although, to date, only independent financial advisers have felt the need to invest in an actively managed campaign to reinforce the benefits of their status.
Depolarisation was created to simplify the market for consumers, with a choice of independent or multi-tied advisers. But two years after depolarisation, the term ‘multi-tie’ has been abused to such a degree there are now differing degrees of multi-tie which begs the question – when is a multi-tie not a multi-tie?
At its simplest, there are four types of multi-tie:
lThe true multi-tie offers a good selection of providers and products in each product area, allowing the adviser to offer a real choice of credible alternatives to meet their clients’ needs. Confusingly, this type of multi-tie is available from many independfent financial advisers who use a panel approach.
lThe false multi-tie proposition is really a single-tie that has engineered a multi-brand approach to give the appearance of choice. Alternatively it bases its multi-tie status on the back of a wide mortgage panel.
lThe misleading multi-tie proposition appears to offer the same degree of choice but in reality advisers are offered incentives to push business through a single provider on the panel.
lThe high street lender, which is just waking up to the possibility of life beyond the single-tie.
Surely the true spirit of multi-tie requires networks and panel creators to offer advisers and their clients the choice of best-of-breed products from leading industry providers and cutting edge portal and point of sale technology to underpin the multi-tie proposition. As well as the obvious benefits for clients, the commitment and support of industry-leading providers brings additional benefits in the training, development and ongoing education of brokers.
I believe absolutely in appointed representatives focusing on client needs while ” How many recently bereaved widows with the right protection in place ask the question ‘what type of adviser sold me the plan?'”the networks concentrate on compliance issues, negotiating fees from product providers and making it easier for brokers to adhere to treating customers fairly principles. But more than this, I believe the quality of advice will always supersede any of these overworked and self-interested discussions. After all how many recently bereaved widows with the right protection in place ask the question “what type of adviser sold me the plan?”
When the real value exists in the relationship between consumer and distributor, and the adviser is doing their job well, does it really matter whether the adviser is tied or independent? Especially when the government is investing 50m in exploring feasibility of providing free generic financial advice service for all within six years.
Brokers – even those that currently charge a fee for advice – have endorsed the idea of the service, not least because it delivers a strong message about the value of professional advice. There is a true correlation between greater financial awareness leading to potential consumers taking a greater interest in their financial affairs.
I applaud the government for trying to bridge the ever-increasing advice gap between the haves and the have nots. Even though some of us may have believed free advice was already available from bodies such as the Citizen’s Advice Bureau.
But how does this 50m government investment in studying the feasibility of free advice equate to the 50m increase the regulator requires to run the business of regulation in the UK over the next few years?
And how does this government advocate free financial advice for all by 2013 when Defaqto predicts free banking will disappear in two years’ time, and reports rainy day credit card users will be hit with a 35 annual charge for not using their cards regularly.
Free advice will exercise our minds a lot over the coming weeks and months. It will certainly set the tied versus independent debate into context. But given the banks’ move to create new income streams by levying new fees and reintroducing old charges, the biggest threat to all of us – perceived free advice from banks pushing customers into relationships with their single-tie providers – could well be a thing of the past. And that really does call for a round of applause.
By Gerry O’Brien, managing director, Home of Choice