Weekend Digest for Financial Planners/Advisers & Paraplanners (26th & 27th Jan)


This week, our friends in the shinny offices of Canary Wharf issued a list of top questions asked by advisers on RDR and their answers to those questions! Long overdue if you ask me. Overall though, we think  it is a very useful piece and hopefully one that helps your  answer some of those nagging RDR questions. I have provided a snippet here but I think the full paper is worth a read.

So here’s the latest installment of Adviser Digest, with a summary of the interesting articles this week. Click on the title to read the full article(opens new window)


 What’s The Key to 1% Fee Challenge?

This article in NMA by Nick Cann of the IFP examines the challenge advisers face in justifying a 1% ongoing fee. “While a 1% charge may not sound a lot,  ….in the current environment, where investment returns remain under pressure and in many cases the investment has been outsourced, the situation might be different. Add in the need for greater transparency, a pounds-and-pence translation of the 1% and an increased interest around cost, and the task becomes more challenging.”

He argues that firms can build stronger long term relationship based on trust by  shifting focus from regulatory activities (product brokering) to  client’s likelihood of being able to achieve their goals. This also means meetings with clients are far more engaging and fulfilling (for both client and planner), a world away from the uncomfortable shuffling of portfolio statements with an awkward conversation about performance or lack of it.

However, Nick posses the difficult question ‘Is 1% the right fee?’  As you might expect the answer is, it depends on what the client values and are willing to pay for.  “Trying to cram three or four meetings, newsletters and a whole range of extras into the 1% is futile if the client does not want this or is unable to see any value.”


Doing the D2C Hokey-Cokey

This article in MoneyMarketing by Platforums’s Holly Mackay examines the world of Direct –to-Consumer platforms. Mackay points to research suggesting that  a massive 84 per cent of  UK investors will either fully self-serve or dip in and out of task-based advice. It is the latter than she refers to as ‘hokey-cokey’ advice

Interestingly, only 25% of investors cite price as the main driver in choosing what platform to use, nearly all citing Brand as a key element with popular names like Hargreaves, Barclays, Fidelity and TD Direct still dominating the space. No surprise there, given the defaulting in comparing platform charges, even in the D2C space.

An important trend is that consumers are (still) looking for the answer to that age old question “where do I invest?”   Mackay cites the fact that more than 70% of inflows on D2C platform goes into shortlists, model portfolios and multi-manager funds as the evidence of this.  ‘Open architecture’ she says ‘sucks as a concept for the average Joe.’

In attempt to provide consumer needs for guidance, ‘new digital innovators are pushing the boundaries of financial advice but is it compliant? Discuss. Does it meet a customer need? Yes. You can’t put a ‘tax’ on fruit and get cross when people eat sweets.’


Your Top RDR Questions Answered

As I pointed out earlier, this is a really useful piece and well worth a read but a few things caught my attention…

This is what the FSA has to say in response to the question “What must I have on file to prove that I have been offering independence advice”

Firms need to show evidence that they are able to advise on all retail investment products (RIPs) that are capable of meeting the investment needs and objectives of their retail clients. As they need to be assessed on an individual client basis, many firms will be unable to say upfront what products may be capable of meeting the investment needs and objectives of their clients. So we will expect most firms providing independent advice to be able to provide advice on all types of RIPs.

Advisory firms typically use research to distil the product market (whether or not they formally construct a panel). If a firm does this, it should be able to show evidence of its selection criteria to select products and the product research it has undertaken, and how these are consistent with the independence requirements and the client’s best interests rule. If a firm excludes a certain type of RIP from its ‘panel’ because, after review, it decides that there is a valid reason consistent with the client’s best interests rule for doing so, it should be able to show evidence of this decision.

A firm that says it provides independent advice also needs to be able to advise off-panel if that would be in the best interests of a particular client. As stated in our previous guidance (FG12/15), to do this a firm’s advisers should maintain an awareness of what is and is not included in the panel.

This is so it can identify clients for whom an off-panel solution would be suitable. The firm will also need to show evidence of how it regularly reviews the decision to exclude certain product types  from its panel.

A firm that holds itself out as independent should also genuinely be able to consider all RIPs of the relevant market. We would question a firm that said it was independent and considered all products but did not have a mechanism for actually advising on a particular product – investment trusts or exchange traded funds (ETFs) for example.

We would also expect the firm’s disclosure documentation to be clear about the service the firm.

And to the question ‘What  do I need to do on my suitability reports to show that I have not considered certain retail investment products’

The suitability report (which will be required in most cases) for an individual client should set out the client’s demands and needs and explain why the firm has concluded that the recommended transaction is suitable for the client. It should also set out the possible disadvantages of the transaction. There is no requirement to set out all the products that you have not recommended.

A firm can exclude a certain type of RIP from its ‘panel’ because, after review, it decides that doing so is consistent with the client’s best interests rule. It should be able to show evidence of this decision, but it does not have to repeat this in the suitability report.

This is something I have been banging on for some time; if you put solid investment process in place at firm level, you DON’T need to exclude products with every single client.



I hope you have enjoyed this and hopefully it’ll make you job a little easier! As paraplanners, that’s what we do! As usual, thought and comments are welcome. Enjoy your weekend!










Abraham Okusanya
Abraham is the founder of FinalytiQ, a research consultancy for platforms, asset managers, and advisory firms. Recognised as one of the country’s leading experts in retirement income, platforms and investment propositions, Abraham has authored several papers on these subjects and delivered talks to the Personal Finance Society, The FCA and several conferences across the country.

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