Almost 18 months ago now we reported that some of the big banks were planning to get back into the advice market. (Oh, dear Banks are back in the advice market!)
Well its now official. I personally received a letter from my local Halifax branch to let me know that I could now talk to a financial adviser about my personal finances. This letter comes almost 10 years since the Halifax along with most of the other high street banks pulled out of the advice market. For most customers anyway. Some of the banks did continue to provide advice to their “high net worth” customers, whilst closing branch-based access to advice for most people.
There were two reasons for this, both in response to the Retail Distribution Review (RDR) in financial services which came into force in 2012. RDR meant two things to the banks. Firstly, the new regulations signalled an end to commission being paid on advice and being replaced by the requirement to introduce a charge for advice. Commissions had earned the banks hundreds of millions each year and adviser charges were never going to generate as much revenue. The second problem was that RDR meant that all financial advisors had to re-qualify going forward. This meant re-training on a massive scale and the requirement to pass exams all over again. Some advisers hadn’t had to pass exams for over 20 years, so it was clearly going to be an issue for many. Looking at the two challenges together, the cost of re-training and the reduction of revenues meant that all the banks decided to pull out of the advice market.
The effect of this decision was to leave ordinary bank customers with no access to an advisor through their bank, even though they had investments with them. The only alternative was to find another adviser or continue to hold the investments without any advice.
Once they had pulled out of the advice market, a number of banks also started to face challenges from clients claiming compensation for poor advice.
Now though, it appears that many of the banks have decided that they are “missing out” on the value of advice (.i.e. the money they could be earning) and have decided to move back into the market. Given that they all dismissed the adviser workforces the new banking advice model is to partner with an existing big player. So, we’ve seen Halifax tying up with Schroers Personal Wealth (part of Scottish Widows).
What does that mean? Well for the customer it means that they are being offered “tied” rather than independent financial advice. Tied advice means that only the products of the owner provider will be offered, in the case of Halifax, products from Schroders/Scottish Widows, so immediately customers are once again having their choice immediately limited.
But what else is being offered?
Well, according to the letter Halifax sent to me, I can look forward to the following:
- Transparent pricing – which is what we provide of course
- The development of a personalised financial plan – which is ultimately what you get when you pay for advice.
- The choice of a one off or ongoing service – this is interesting. We really only offer advice with an ongoing service arrangement because we only want to deal with long term clients.
- Phone and online appointment options – but not face to face. Our office is open for face to face advice meetings, which most of our clients are currently opting for, despite the circumstances.
- Technology that allows access to your investments 2 hours a day, seven days a week – just like our online client portal facility.
- No exit fees (third party providers may charge exit fees if you decide to cancel their products) – its interesting that Halifax have included this in their marketing literature. This is clearly a swipe at the market leader St James Place Wealth Management, who do charge exit fees to their clients (something we’ve never understood).
So, looking at the “new” offer from Halifax, it seems that they aren’t offering anything that we don’t already offer our clients. The big difference is that we are Independent Financial Advisers which means we consider the whole of the market not just Schroder products and of course, we didn’t decide to abandon our customers 10 years ago and leave them without any help.
Despite all this, we do need more financial advisors, so perhaps this new service is still welcome?