This means their business model has to reflect what their clients want from them and for them to give value for money for the services they provide. Slowly, the word ‘independent’ is starting to be translated as ‘independent by ownership’ rather than ‘independent advice’.
As a result, a great deal more intermediaries are happy to describe themselves as restricted – and, thanks to an unforeseen quirk of fate, they are actually able to offer a wider investment choice than their whole-of-market independent colleagues.
At long last, it is the client who has the bargaining power, not the intermediary, nor the fund group, nor whoever ultimately provides the investment-based solution – and should certainly not be the platforms.
This is being seen in the rise of execution-only investment business which is expected to accelerate, according to CoreData, and grow almost threefold in terms of the number of advisers (sic, surely) by 2014.
Execution only
This is not new, as the number of portfolios with £250,000 to £1m sitting on execution-only stockbroking platforms grew by more than 120% in the two years to 2010 while portfolios with between £1m and £10m grew by 70%.
This does not mean that investment advice is not needed – far from it – bit what it does indicate is that individuals need far more financial planning advice than they have previously.
At least in part this explains the rise of traditional discretionary fund management businesses talking of providing – and in the case of companies like Brewin Dolphin, building – a financial planning as well as investment management service.
Putting the client at the centre of the proposition is common sense, and pretty much everyone says they do it. But they do not. What they put at the centre of the proposition is an investment solution and the fees they can earn from whatever they provide, as a percentage of assets under management.
Client choice
What the client wants is changing, partly because of the economic backdrop, partly from a greater understanding of what is available, partly because of the increased transparency of what they are paying for (and therefore the greater ability to challenge the amount they are paying).
The old model of simply tilting a business at the very wealthy clients puts the emphasis on the assets and not the clients and as revenues earned from these assets falls alternative revenue streams need to be found.
Financial planning is and will always be a very separate discipline from investment management, but the need for both is getting closer all the time.
