FR: How are you finding current market conditions?
Following significant investment in Tenet’s own infrastructure, as part of a wider transformation programme that began three years ago, RDR implementation went without a hitch.
The only noticeable effect RDR has had so far is that approximately 10 per cent of the investment adviser population have been de-authorised, either by choice or as a consequence of missing the qualification deadline, but overall net adviser numbers are due to higher levels of recruitment in the second half of 2012 than forecast.
Generally, the mood amongst advisers is reasonably bullish, although uncertainty regarding the true impact of RDR continues to create varying levels of apprehension regarding the long-term future.
FR: What have been the biggest challenges facing IFAs in the last year?
Apart from the obvious challenge of running a business in what is still a tough economic climate and transitioning towards new regulatory rules, IFAs have had to continually grapple with a barrage of mis-communication and a general lack of clarification across the media and from Canary Wharf.
The level of spurious data and assumptions made from consumer surveys has added little value. Nor has it helped to create a more certain or stable environment for advisers to build-on in the new post-RDR world.
Whilst 2013 has started without any evident major incident, there is little doubt in anyone’s mind that evolutionary change is likely to occur as the year unfolds.
FR: And the biggest opportunities?
Unlike many tied and multi-tied sales forces, IFAs have been in a period of transition towards a more service-based proposition for the past few years. Indeed, as far back as three years ago, the majority of advisers under Tenet’s umbrella had already introduced fee-based structures - typically taking a reduced percentage for initial advice and half a per cent for on-going service, utilising commission offset as their main method of remuneration. The move to adviser charging has therefore been less challenging.
Recognition of the need to build a more sustainable business, based on recurring income streams, has meant many advisers were better prepared for the change to fee-charging.
RDR has therefore served to accelerate the development of advisory businesses, who in future will be able to generate income from both initial advice and the on-going service they provide - thereby controlling a larger share of the value chain.
FR: What has been Tenet Group’s biggest achievement to date?
Tenet is one of the longest-established support service groups in the UK and has enjoyed a continuous serious of ‘achievements’ during its history. The group has transitioned its model to capitalise on the opportunities that lie ahead and has been able to offer advisers one of the most competitive and financially-stable propositions in the market today. More than 98% of adviser firms have maintained an independent advice model due to Tenet’s clear support strategy which allows advisers to make their own informed decisions and choices.
FR: How do you predict the Retail Distribution Review is going to change the financial services market? Have you had much feedback from advisers?
There is no doubt that RDR will have a profound impact on the future shape of the financial services market, but this will manifest itself over a period of time.
Whilst the main negative impact was expected to strike the advisory market, it is this sector which ironically seems set to develop more controllable business propositions, resulting in greater long-term sustainability and profitability.
Traditional product providers and fund managers are likely to see further consolidation in their respective spheres of operation and the platform space also looks set for some considerable consolidation in the next five years.
In the past, advisers have relied heavily on initial commission and traditional manufacturers and fund managers have benefitted from large asset-backed books. Evolution now dictates that it is advisory firms who will control the end-to-end value chain in a more significant way, changing the future financial services landscape forever.
FR: In terms of the RDR, what advice would you offer to an adviser who doesn’t know where to start?
Many advisers are still in the very early stages of RDR implementation and falsely believe falling they are perhaps behind the curve. In fact, they represent the majority and as a result Tenet is providing ample support to help them transition more rapidly into new models.
Advisers have often been unfairly criticised for being unprepared - but many of the commentators who are accusing them do not understand the advisory market deeply enough and are using the wrong measures, or comparing them with much larger businesses. Conversely, the IFA sector is predominantly made up of one-to-three-adviser practices and their evolution to post-RDR models can be more easily accelerated from the point of implementation and beyond.
If you were in charge of the Financial Services Authority for a day, what would you do?
I would implement a new Retail Financial Services Authority: an industry-led organisation encompassing its own regulatory structure, to more effectivelty focus on developing opportunities via a less restricted and more vibrant industry. The overriding priority would be to improve consumer outcomes rather than just focusing on retrospective enforcement.
The current disconnection between industry, regulator and government will continue to be a recipe for future failure unless the industry itself is empowered to take responsibility for shaping the future...
FR: You will soon be leaving Tenet - what’s next on the horizon for you and do you feel it’s time for a new challenge?
I have thoroughly enjoyed my time with Tenet during the last nine years and have built some great relationships across the sector.
Specifically I have valued the level of engagement on the front line with advisers, which also, in turn, involved a measure of face-to-face involvement with their clients The diversity of my role from operational to strategic has also provided an opportunity to build a significant network of contacts and relationships across the wider financial services market.
In addition to my operational role, I gained an invaluable insight into a wide variety of regulatory and lobbying matters and hope to put the experience I gained to good use in my new role at the PFS, to help secure and justify the professional recognition that we all seek for our industry and which the majority so richly deserve.
I am passionate about our profession and look forward to working with the PFS board, its members and others across the industry to achieve this objective.
