Unintended consequence
The reduction in the number of advisers, plus the additional cost of compliance and the greater demand for advice due to UK pension’s changes, has meant that the remaining advisers have focused on clients with high levels of assets.
The unintended consequence of the RDR has therefore been the creation of an ‘advice gap’, where those who have too few assets cannot get advice easily, although they are often those most in need of financial help. This is clearly not a desirable outcome for consumers.
While many international advisers remain commission-based and primarily dependent on selling offshore bonds, there is a change in the air. In part this is due to the greater financial understanding among their clients, but also because many adviser firms are aware of the rising tide of regulation and are looking for a more sustainable business model.
The fee-based route is now being chosen by an increasing number of international adviser firms, particularly for their higher value clients. Switching to earning on- going income by managing the clients’ investments instead of obtaining ‘single hit’ indemnity commissions from selling products, has massive benefits to an adviser firm in the long term.
A reoccurring and persistent revenue stream puts intrinsic value in the business and is key to obtaining a good exit value from a future trade sale or flotation. While the transition may be financially painful in the short term, the long-term financial benefits greatly outweigh the transition costs.
At Platform One we currently offer three types of services to international adviser firms that enable them to make this transition if required: a traditional commission-based service; a fee-based service; and a fee-based regular savings option for international investment and pension schemes. There are two new services we also plan to add shortly to cover other global adviser requirements.
Providing a regulatory compliant international wrap platform with all these services, plus high service levels and secure custody of clients’ assets, is a challenge.
There is no single platform service to suit the needs of all jurisdictions, however, this range and diversity of requirements make the global market so demanding and yet so interesting.
