Mind the gap in dealer services

Historically, it has been large institutions such as banks who have provided advisers with support and delivered core functions, such as governance, compliance and revenue processing. The true costs of these functions were hidden and cross-subsidised by product margin.

But over the past few years, we have witnessed the mass exodus of large participants out of wealth management and the demise of the vertically integrated business model. The large banks have either divested their advice businesses or exited from wealth management all together, leaving little infrastructure behind.

In response, we have seen the rapid growth in boutique and mid-tier licensees. Of the 2,161 currently registered advice licensees, privately owned or limited license categories account for 60% of advisers. These groups have been forced to absorb the rising cost of ongoing regulatory and compliance obligations without the scale commonly required for significant investments in technology and data infrastructure.

According to XY Adviser Chief Technology officer Adrian Patty, compliance can be simple, and it can be complex, and while many advisers coming from the institutional world are used to a compliance requirement and regime, their view is quite different to the non-institutional advisers.

This uncertainty over compliance has only exacerbated licensees’ existing desire to find another way.

Fortnum Private Wealth’s Managing Director Neil Younger said there is now an alignment of views amongst several industry players around the need to make a step change in how advice is delivered. He said there is a degree of shared frustration around the model of the old presenting challenges around accessibility to advice and the commercials associated with that.

However, advisers are not looking to re-create what was, but to pioneer an even better solution, one that is “less detective and more preventative”. They are conscious that the current monitoring and supervision is backward-looking and there is a desire to monitor and supervise so they are not doing annual audits but rather things are being audited consistently.  This would free up resources to do coaching, to improve processes, to create better client experiences for people.

According to XY Adviser Managing Director Clayton Daniel, it is a case of advisers’ needs not currently being met, and if you consider the traditional role licensees have played, there is a lack of these services being provided in the market.  Although there has been an increase in the services provided by specialists, it is a case of the industry catching up with what advisers need.

Lifestyle Financial Services CEO Gareth Hall agreed. He said although tools exist, they are so broad practices need to spend large amounts of money for a tool to function how they want it to. This is particularly challenging for smaller firms who must customise tools to meet their needs.

This article is an extract from HUB24’s whitepaper titled ‘HUB24: The future of platforms and data in facilitating advice’ and can be accessed here.