An interesting announcement from Old Mutual – they are relaunching a retail wealth management service on the High Street, with real branches and real advisers.
We think they have spotted a classic market gap regarding retail financial advice, and won’t be surprised to see others following their lead. The market for financial advice collapsed in 2012, following the Retail Distribution Review (RDR) which insisted that all financial advice should be paid for through fees rather than being hidden through commission payments made when advisers were able to sell you something.
What’s provoked this?
How the world has changed! The Pensions reforms, which took effect this April, were a hugely disruptive change, which gave consumers control over their own pension funds to an unprecedented degree. Unfortunately, helping people to manage their funds has not kept up with the freedoms they have been given, which means that the over-55’s – those with access to their savings – now form the biggest single target for scammers, crooks, charity-muggers, and dodgy salesmen whose first priority will be their own benefit, not that of their customers. The dilemma facing many, who have no confidence in their own ability to manage what will often be six-figure sums, will be how they can manage these funds for the rest of their lives without losing them, spending them, or having them stolen.
Time for new services to emerge to meet what is arguably the biggest (and biggest funded) customer requirement of our time; making sure the over-55’s don’t run out of cash before they die.
What’s needed for effective retail financial advice?
The challenge for service providers is to work out what is needed and design a suite of products that meets a wide range of needs, and to charge a fee for doing this, within the legislative framework. To do this well, providers really need to think outside the box. Those coming from the traditional financial services industry may well be seeing it in traditional financial services terms, as fund management.
A more customer centric view would look at a much wider spectrum of the challenges faced by these customers, and provide services which cover a much broader range of needs, including:
- How to manage the costs of staying healthy
- Avoiding criminals, scammers, and charity muggers
- Protecting your data
- Managing inheritance
Seen in this context, the title of ‘financial adviser’ does not cover the scope of what is required. Finance is the start point but the range of help to be provided needs to go much further. The critical characteristic, which can lead to success, however, is the ability to gain and maintain the trust of your customers.
The broad challenge
So which organisations could develop and market such a proposition? Many of the traditional finance brands, including Barclays and HSBC, withdrew from the retail financial advice market following RDR. Many bank brands remain tarnished, although it is possible to see the likes of First Direct, Metro and TSB seeking to provide a service. It would be no surprise if Virgin Money, for example, extended into this area. Other brands would have to consider whether they could both gain volume and provide a service in such an area. We are sure that lots of financial brands – Old Mutual being simply the first – will take a serious look.
Why are we blogging about this?
Quadrant worked with a very early entrant into high street IFA’s, First Advice. Funding was withdrawn before the concept was proved but a four branch business in the North West got to breakeven within a year of launch, proving the demand for trustworthy financial advice. Pension reforms have put billions of pounds in the hands of consumers who don’t know how to manage their money and need help. The opportunity to divert funds from scammers and dodgy salesmen to service provider brands is immense, but requires a new business model to truly meet consumer needs.