Experts challenge claim RDR will benefit tied advisers

Recent moves by banks to pull out of offering in-branch financial advice challenge claims they stand to benefit the most from the retail distribution review (RDR), experts argue.

Earlier this month, tied intermediary Co-operative Financial Services (Co-op FS) said it was to stop offering 'advice' while, in January, Barclays announced it was closing its financial planning arm.

HSBC has also confirmed almost 500 advisory roles will be cut in a "re-shaping" of its UK business model.

In all three cases, the RDR was cited as a reason for the changes, while Co-op FS also blamed rising regulatory costs.

A number of advisers claim changes to the way advisers are paid as a result of RDR will drive consumers towards the banks.

With access to millions of retail customers, they will be best-placed to cater for those "disenfranchised" by RDR, advisers claims.

But others argue this is a misconception.

Andrew Strange, director of policy at AIFA, explained why he believed some of the larger tied intermediaries were having problems coming to terms with RDR and changing remuneration models.

"The reality is if you're sitting in a bank branch and you have one pension product, one bond and a limited range of investment, you're caught by RDR," he said.

"It's a very difficult sales patter to say: ‘I'm going to charge you between £250 and £500 for advice and the conclusion is you might end up with this one pension I've got, but I'm still going to charge you separately.'

"An IFA can say: ‘I'm charging £500 but I'm looking across the market with an unbiased, unrestricted view.' It's a much easier sales proposition in that respect."

Meanwhile, Neil Liversidge, managing director of West Riding Personal Finance Solutions, believes a different culture has led to burdensome compliance and regulation costs for larger firms.

He said the pressure on some of their employees meant a large compliance function was needed to ensure they are not going wrong.

"I'm a one-man band and I'm never going to do anything else," he said.

"What happens to this place determines my entire future so I'm not going to do anything dodgy and I'm going to do the job as well as I can do it.

"The regulatory costs weigh heavily on us but, as a one-man adviser, you do not need a bloated compliance established.

"I inherently have an interest in making sure what I do is compliant."

One exception to the trend of banks exiting financial advice has been Lloyds, which recently announced its intention to grow its tied advisory arm to push its Scottish Widows products.

The company said it was aiming to "maximise the conversion" of its retail banking customers to bancassurance through offering them "affordable and relevant advice, taking advantage of the advice and distribution gap we see as being created by the RDR".