However, it is also likely to lead to a more restricted approved product list (APL), with a focus on a comprehensive understanding of the relatively smaller number of products on the list, thus reducing the chances of a sub-optimal product being available for consideration by clients.
In practice, research provides the core information to an adviser and helps to select the APL. The selection of a product from this list by the adviser will always be done whilst having regard to the client’s needs.
Rice Warner has a keen interest in the debate on research ratings as we provide risk insurance product research through COIN Inc and Midwinter Reasonable Basis. In our discussions with advisers who use this software, we have always been at pains to stress that our research provides a sound analysis of the risk insurance products provided by each insurer but that the key determinant of the most ap-propriate product for an individual client should be the client’s own personal circumstances.
MODULAR SERVICES
The provision of holistic financial advice will continue to be the backbone of most dealer groups over the next five years. However, there will be a significant number of clients who will not need or wish to pay for a holistic financial plan. They may have a need for advice on one particular financial issue or strategy and be content to seek advice on that issue alone, albeit that they may be unaware of other needs that may come to light though a holistic advice process.
For these clients, modular advice services will be developed, under which advisers and their clients can discuss the range of financial needs and challenges, and the client can then determine whether they need holistic advice or whether they wish to limit the initial advice to an identified area or areas, leaving other areas to be considered at a later date.
Critics of the modular advice approach say that it leads to sub-optimal financial outcomes for clients because not all the required financial arrangements are established after the initial advice is provided. However, it is likely to appeal to clients who would otherwise not seek advice at all or for whom consideration of multiple financial issues simultaneously is too daunting.
The modular approach to the provision of financial advice is likely to extend the reach of financial advice services into a broader client base (such as “B” and “C” clients). It is also worth mentioning that superannuation funds (particularly industry and public sector funds) will become strong competitors in this market through the development of intra-fund advice services, particularly if intra-fund advice is extended to include retirement advice (as is proposed with FoFA).
There is clearly still a high degree of uncertainty regarding the detailed outcome of regulatory changes affecting the advice industry, but the market is already moving in a number of innovative exciting directions which present significant opportunities for dealer groups and advisers to prosper over the next five years.
Richard Weatherhead is a director of Rice Warner Actuaries – www.ricewarner.com
