Survival of the Fittest?

Below is a diagram representing the “evolution” of financial advice.

The flowchart above left represents the current situation for many of the clients of advisers. A product is manufactured, loaded with commission to incentivise the salesperson (variously referred to as a planner, adviser etc); the salesperson then finds a customer and shoehorns the customer into the product.

The chart above right represents best practice all over the world and is soon to be imposed in the UK when everything changes for advisers and clients on 1 January 2013. We have been fee advisers for many years and this chart represents our working practice; fees are agreed between client and adviser and the adviser then sources independent investment solutions, which expose the client to suitable asset classes for their investments.

The attached document (click here) tells the story of an adviser working under the “old model” and demonstrates the pitfalls for clients and adviser of that process. Not only could the adviser not develop her own strategies, she consulted a manufacturer for a product which turned out to be totally unsuitable and pinned this product on the clients. In this case the manufacturer (Zurich) shared the subsequent liability for the unsuitability, but all parties have suffered, due to the inherent weaknesses of a system which does not put the client first.

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