Welcome to the Revolution

A wiser man than I said that “Advisers need funds, insurance plans, platforms and many other products…. Being brutal, I can see funds and insurers surviving without IFAs ….. IFAs cannot survive without providers.”


Being equally brutal, if they could have done without us, they would already have done so. They can’t, so they haven’t and they won’t. They need us more than we need them.

Let’s look at why:

The world has changed. Importantly, we need to be aware that RDR, TCF and other regulatory initiatives are a symptom of these changes, not the cause.

There are two main, interacting drivers going on:

1. We live in a world of Consumer Power. That much is a cliché. We can buy anything from anywhere at anytime. And it’s amazing.

But as the sheer number of phone calls and emails trying to scam us demonstrates, we live in a world where the fences are down, and Big Brother is powerless to do anything to help until the horse has bolted.. There are always trade offs, but is this one we are comfortable with? Who amongst us does NOT know someone who has been the victim of a telephone scam? How many of your emails are ‘phishing’ scams?

What is infuriating is that two cases I know about, the victim was warned that a particular interaction was a scam part way through the process, but preferred to trust the voice on the phone, rather than those around them such as family and friends. They are now naturally very, very wary.

So it seems that one unintended consequence of all this consumer power is that we are more vulnerable, and there is less protection than there was when we had a more ‘top down’ paternalistic system. We must learn to look after ourselves.

So we withdraw from doing business over the phone. We distrust emails. We value the face to face even more, especially when we know the people concerned.

2. The rise and rise of the internet. Again, a cliché, but where once the book ‘The World is flat’ by Thomas Friedman was almost Science Fiction. It’s now a simple description of the world we live in. It was published in 2004. The YouTube presentation “Shift Happens” has to be constantly updated – real life runs ahead of the already scary numbers in the (geographically challenged!) original.

So anything you know, your client can know in 20 minutes. We were once the gatekeepers to knowledge – not any more. So the value in the role of the adviser / broker / salesperson has shifted. Away from Distribution and towards the Trusted Adviser role.

So far, so good – we all know this.

So back to the initial premise:

All the above has moved us from a Top Down world where Wholesale (Funds) distribute to Retail (Providers) who distribute through Intermediaries (IFAs) who sell to real people – Clients.

And the past is full of failed attempts by Retail to bypass the Intermediary. These have included Appointed Reps. Online marketing. Direct Sales. ‘Accidentally’ writing to the clients. (which still goes on of course– did anyone mention Standard Life?) And we can recall the financial disasters that all these attempts actually were in real life. Frankly, the Providers HAVE tried to do without us. And repeatedly failed.

In the new, bottom up world we now live in, Clients have relationships with Trusted Advisers, who use technology to minimise their and their clients exposure to the machinations of the ever more distressed Retail sector, using technology to access the Wholesale sector as easily and cheaply as possible.

In turn, the wholesale sector designs funds and services for ‘Intermediaries’, not Clients.

The Retail sector looks ever more irrelevant. In a post RDR, open architecture world, these firms can only compete on service standards and the quality of their administration. No, really. Stop laughing there at the back. No wonder we are seeing the rise and rise of Platforms. And this will continue.

But this sector will not go quietly into that dark night. It keeps casting around for a role. One of these roles is that it has appointed to itself is the provider of business and commercial advice to Advisers. It would be funny if it was not true…..

So no. Actually we don’t need Providers and funds. At least, not all of them. Why do we need 40 000 funds? And the ones we do need do not have to be based in the UK either.

The World is Flat asserts that anything that can be outsourced, will be outsourced to places such as India, South Africa and China. Administration can be. Fund Management can be. The Client relationships that we (Planners and Advisers) have built can’t (easily) be outsourced. Remember the issues about email and telephone scams and degradation of trust we mentioned earlier?

So I have a vital question for all you Product Providers and Fund Administrators……

…… How is your spoken Mandarin these days?


3 thoughts on “Welcome to the Revolution

  • Agreed we live in a world of consumer power, but not everything can be oursourced, digitised, or otherwise commoditised. Advice, importantly for us, is likely to still be face-to-face, and local, and
    It’s not beyond me to do my tax return, but I pay someone to do it – the tools are out there, online for me to use, and I am more tech savvy than most, but I feel it is not cost or time-effective for me to do it.
    At the same time, many firms who outsourced, are bringing services back onshore. Why? Well there’s the economic factors – weaker pound, rising offshore wages etc.; but there’s also the simple fact that it’s easier to manage workers in the same office when you can get face-to-face with them – higher wages, but higher productivity. There’s also the simple fact British consumers still respond better to British voices than Indian, Malaysian etc.
    So you’re right that the world will evolve, and the industrial revolution saw more use of machines, and the eventual reduction in human home labour (servants replaced by mechanised dishwashers); but I feel the digital revolution will not be as radical as you suggest – at least not for several decades.
    If there’s one thing futurologists reliably do, it’s getting their predictions wrong. On that note, why is Thomas L. Friedman’s book not available on Kindle?

  • A thought provoking piece, Phil.
    In the old world, where IFAs were distributors of product, we needed products to distribute.
    Nowadays, we are distributors of advice, paid by our clients. We’re happy to provide financial plans to people whose assets are made up of property and cash, who might be heavily geared.
    We dont need products.
    But most people have them. And products, bless em, are ridiculously complicated .If you have a few hundred thousand in a pension when you retire, what do you do? Take pot luck, do the equivalent of a degree course to learn about your options or go and see an adviser?
    Products (mean that clients) need advisers.
    The internet doesnt help. Is having a whole load of information, 95% of which is wrong, irrelevant or out of date, any better than having none at all? We remain the gatekeepers of knowledge, just in a different way.

  • It can be dangerous to base the future on the past – as it says on the brochures.

    The RDR is just a fleabite compared to the forces driving social change in our World today.

    The financial services industry that we have in the UK was built in an era of opacity and deference and was in essence designed to serve itself not its clients.

    The future for individuals wanting to earn a living in the industry will be based on the demonstration of tangible value. Financial products have rarely done what it said on their tins and when they have it has probably just been happenstance.

    We face a complete change of mindset as we accept the challenge of satisfying our clients rather than the providers.

    The almost complete absence of help being offered to the adviser community on the challenge of demonstrating value shows us that there really is no useful knowledge within either providers or the army of gurus hoping to continue to earn a living off the backs of advisers.

    How can fear be used by regulators, providers et al, to control advisers when the link of remuneration and product liability have disappeared into the rear view mirror.

    Yes the future is going to be very different and very rewarding for those who rise to the challenges but we should beware of thinking that the future is just going to be the past in a different package.


Leave a Reply