They say the way you can tell if a politician is lying is to check if their lips are moving: if they are, then they are lying. That’s probably true, and it also holds water in our industry.
I’ve been thinking about that quote recently, as so many of the large companies that advisers and clients have to deal with on a regular basis appear to have joined a weird ‘death cult’, which involves setting your own hair on fire and then running around the executive car park complaining your head is hot.
In particular, my feline spider-sense (this is totally a real thing) has been twanging as provider after provider tries to outdo its rivals when it comes to vows of solidarity with advisers and how central they are to the provider’s business.
A sister fib to this one is the classic that the provider sees itself very much as a supplier; just part of the supply chain to the adviser, because it’s the adviser who’s at the centre of the universe, and so on. This is a particularly good fib because it takes more energy to disprove than most people can be bothered to expend.
But what happens when advisers really do reinvent themselves as the centre of the universe? What happens when they become the manufacturer of the proposition the client receives? What happens to typical, off-the-shelf platforms or pensions, or products, when the adviser can make these themself?
The answer is profound: a potential rewiring of the way the retail long-term savings and investment sector works. One which connects the adviser firm and the componentry that goes into ensuring clients get where they’re going, and disintermediates the ride-along Charlies who are currently camped out on the client’s portfolio.
New developments
In the news recently we’ve seen some interesting shifts from AFH and Foster Denovo in this direction. Both are consolidators in one form or another, and both are building up some pretty chunky scale: AFH, a relative latecomer to the space, has north of £3bn in assets under administration (AUA).
Both firms are absorbing the platform charge – or planning to – inside their own adviser charge, and both are running a white-label platform arrangement. This simply means that each firm has licensed platform technology itself – in roughly the same sort of way that a Nucleus or a Novia might do – but instead of offering that platform to lots of firms, it just keeps it for itself.
AFH and Foster Denovo have rightly seized the headlines with this move. But there’s understandable confusion. Clients won’t pay an explicit platform charge, that’s true. But there is still cost associated with custody, dealing, tax wrapper provision and administration, and clients still pay that. It is a sort of bundled charging structure, except one that could only have been born post-RDR.
I’d encourage all firms in this position to give clients a breakdown of the adviser charge – “approximately 0.x per cent of your charges goes to investment administration including custody and safeguarding”, or something similar.
