The changing face of financial advice – Neil Shillito gives his view…

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 SG Wealth Management’s Director Neil Shillito gives his view on the changing face of financial advice, read more here…

Neil Shillito, Director
Neil Shillito, Director

Many of you will be aware that as of January 2013 commission payments ceased as a result of the FCA’s ‘Retail Distribution Review’ to be replaced by ‘customer agreed remuneration’ i.e a fee-based, advice led proposition rather than the old commission-driven sales model. It is worth noting that SG Wealth Management was founded in 2001 based upon these ‘RDR’ principles, a full 12 years before they became mandatory.

Although this post RDR model is not perfect and there are still many firms, including some high profile ‘nationals’ who are still operating a commission-driven sales model but dressing it up as something else, all-in-all investors- and those seeking financial advice generally – are immeasurably better off in terms of the quality of the advice they receive and the value they gain from that advice.

What has prompted me to post this commentary is our new business enquiry summary for the month of February 2017, which shows 18 new enquiries totalling a potential £9.5m of investment value. This level of new business activity would have been unthinkable under the old, pre-RDR model.

So what’s going on?

There can be any number of contributory factors and one thing is for sure, we shan’t see this trend continuing every single month! But what is significant from our point of view is that the type of business is well-diversified and includes defined benefit pension transfers; investment planning and inheritance tax planning, so February’s figures are not driven solely by the customary ‘tax year-end’ hype.

What is clear above all else is the change of dynamic between financial advisers and those seeking financial advice. Pre-RDR, there was a high degree of suspicion surrounding financial advice and just how impartial the advice could be, given that the adviser’s remuneration came from selling a product of an insurance company or investment institution. But this is changing and the ‘new model’ benefits both the client and the adviser alike, for the simple reason that their interests are aligned.

Advisers are now more highly qualified than was the case previously, they are more professional in their approach and as a consequence, clients are more inclined to seek advice knowing that they are likely to be better off as a result. Better off not just financially (better management of their money), but by knowing their affairs are properly structured and tailored according to their needs and that regular reviews with their adviser will enable them to ‘stay on track’ as the economic, political and fiscal climate swings to and fro over the years.

There is much to be said for trust, but it’s hard-earned and it’s relatively early days, but the prognosis thus far is very positive.