It may be slightly ironic that investment advisers who spend much of their careers recommending that their clients invest in funds that invest in UK-listed firms rarely work for listed firms themselves.
In the past decade, no more than half a dozen adviser firms have been listed on the Alternative Investment Market at any one time, and, for the most part, they have been taken private, often, unfortunately, in less than auspicious circumstances.
The two exceptions in the ‘advice space’ are St James’s Place and Hargreaves Lansdown. Yet neither is an independent financial adviser and both divide opinion about whether they represent peers, rivals or a different category of firm altogether.
These firms obviously have their fans, but were a hypothetical analyst to rate a hypothetical stock representing the post-RDR adviser sector, it wouldn’t be surprising to see a sell recommendation.
First it would attract unfavourable comparisons with those two aforementioned asset-gathering machines.
Furthermore, recent headlines might reinforce a bearish outlook. Our analyst might, for example, predict that Friends Life’s decision to end trail on many closed-book onshore bonds was likely to be one of many such decisions. Its note might be entitled ‘The End Of The Trail’ and it wouldn’t be wrong. This obviously hurts some advisers’ bottom line, thus the sell signal.
Clients may begin to negotiate charging structures, but many will feel they need advice.
John Lappin
Our bearish industry number cruncher would also look at Hargreaves’s recent results and read about a bullish Peter Hargreaves discussing how the firm was winning business from traditional adviser-focused platforms due to the enforcement of re-registration and gaining work from advisers that had given up the RDR fight. Sell the sector again?
Our analyst might also examine the sorts of ‘charging shapes’ advisers are discussing with their clients and decide that these are not sustainable. It would couple these to predictions from some fund managers that numbers are set to fall again as the full implications of adviser charging kicks in. The ban on consultancy charging hasn’t helped those pension specialists, either.
And yet, there is a counter argument.
We have been hearing predictions of the end of all investment-related commission for a couple of years now. So are advisers really approaching this as anything more than a bonus income from now on? It is another unwelcomed financial blow, yet most advisers and their clients seem to have come to terms with adviser charging.
Clients may begin to negotiate charging structures, but many will feel they need advice. Considering the pension, inheritance tax and capital preservation challenges facing the baby boomers, the supply and demand picture is a lot more complicated than simply suggesting that clients will negotiate prices down.