“No more junkets if you cut our margins” – IFAs warned.


Delegates at PIMS 2017, a floating holiday for Financial Planners (and journalists), seem have  been threatened .

“Platforms will struggle to cut charges without affecting existing services”, Seven Investment Management (7IM) head of platform Verona Smith told advisers (including New Model Adviser to whom I’m grateful for this reporting!

‘I get asked all the time where platform fees are going. The answer is they are going only one way and that is not up,’ she said.

‘But the service I am going to give you is not a service you or your client is going to like if we put the platform fee down.

‘If you want me to halve the platform fee, then don’t expect the phone to be picked up after one ring.’

The threat is hardly veiled!

PIMS claims to support “financial planners” , but a cursory inspection of its sponsors suggests that it is really about wealth management. wealth.PNG

Make no mistake, PIMS is an aquatic trade show.

The context!

Here is what a typical day aboard the cruise-liner Aurora looks like for PIMS delegates

7.45am Pre-arranged breakfast meeting  with a supplier and fellow delegates
9am Mixture of conference sessions, supplier meetings and requested free time
1.15pm Pre-arranged lunch meeting with a supplier and fellow delegates
2.45pm Mixture of conference sessions, supplier meetings and requested free time
6.30pm Free time or an activity
8.30pm Pre-arranged dinner meeting with a supplier and fellow delegates
10.30pm Post dinner drinks and evening entertainment

While you toy with the negotiations around “requested free time” and speculate what kind of evening entertainment begins at 10.30, you can only marvel at the IFA’s complicity.

The main advantage of a cruise ship (for the suppliers) is that you cannot get off, other advantages include limited capacity to make phone calls and with a bit of luck, no access to the internet.

Delegates are sitting ducks for “suppliers” .

The threat itself

I am struggling to understand what an intermediary needs by way of “service ” from a fund manager like 7IM. If its measure is the number of rings an adviser needs to speak to Veronica, then advisers need not quake in their Church’s.

Coincidentally, a paper arrived in my inbox yesterday from a research organisation called Cicero, that directly addressed the question of service, not just the service that IFAs get from suppliers but the service they give to their clients.

Surprisingly, IFAs don’t seem particularly keen to embrace technology

cicero 1.PNG

Less than half the IFAs questioned saw much value in a higher level of technological integration with their “high net worth” clients.

Apparently the HNWs backed this up.

Cicero 2

The threat for IFAs is not from clients demanding new ways of doing things, the IFAs get this. The threat is that 7IM will stop picking the phone up after one ring. By extension they might even stop junketing IFAs on cruise liners while telling them this unpalatable message.

What of the customer?

In April the Financial Conduct Authority (FCA) announced it would review the platform market after it identified a number of concerns about competition in the space.

The regulator said it would look at ‘complex charging structures’ on platforms and examine whether platforms were able to put pressure on asset management charges.

By extension , it will be reviewing the users of platforms (the IFAs) to see what competition is happening. I doubt that the FCA will be asking how many rings an IFA has to wait to speak to their 7IM agent.

Instead , the FCA may be asking some of the questions asked in the Cicero Report “Distribution and Technology – the role of technology across the advice chain”.

The report concludes that the advice “industry” has no real long-term choice other than embrace technology.

“Millennials are living their advice on-line and that’s where they are going for advice”.

Which isn’t quite true, as by the time the millennials have built (or inherited)  the wealth to replace the current client bank, the advisers will be retired.

I think this is the real message for Christopher Woollard at the FCA. The current interests of clients and advisers is aligned. They want a comfy time where the phone is picked up in one ring, where no-one puts too much pressure on price so that a long and healthy retirement beckons.

If this is the message that IFAs are allowing to go to the FCA – and the Cicero paper was to have been discussed by Woollard (till Purdah came down) – then neither 7IM or the platform managers or the IFAs that use these platforms , has a leg to stand on.

Because the one thing that none of these discussions addresses , is the investment outcomes for the people whose wealth (or savings) are being managed.

Vanguard are reported to be about to launch a service where the total cost of ownership for a fund will be 0.3% pa (30bps). The reports are in the FT- a link is included at the end of the blog. While Vanguard will not disrupt the trusted relationship of IFA/client, it will attract the large number of non-advised HNW customers who are fee conscious. Increasingly the old style, high-priced advised platforms and funds will struggle to compete for these new customers.

Service must be digital – prices must be slashed and outcomes improved

The state of the wealth management marking is truly shocking. Compared to the deal being offered members by NEST , L&G and other workplace providers, the platforms are expensive and hopelessly intermediated. With a few exceptions, they need advisers to operate them and PIMS 2017 shows that nothing much has changed since the early 1990s (when I went on one of these cruises myself).

There is an alternative for IFAs keen to learn and create best practice. An example is the Great Pension Transfer debate which has been set up for IFAs by IFAs and features a great line up at an accessible venue and has no sponsorship from “suppliers”. There’s a link to the Great Pension Transfer debate below.

7IM provide a link to the two events, as the idea for the Pension Transfer Debate was born from the FT conference in April at which 7IM were both sponsor and speaker. So appalled were some delegates at the lack of technical knowledge and balance from some of the speakers that they decided to set their own event up – for their own learning.

The 200+ IFAs who have already signed up will be joined by many more before June 19th. If you are an IFA and you are fed up with being junketed, then maybe the Great Pension Transfer Debate is for you.

A word of warning though, there is no telephone to pick up. To register, you’ll have to do things digitally – it’s the only way to keep costs down and get standards up!

Places at the Great Pension Transfer Debate can still be reserved at https://www.eventbrite.co.uk/e/the-great-pension-transfer-debate-tickets-33888509444?aff=eac

PIMS 2017; cutting prices will reduce service ,7IM warn – New Model Adviser – http://citywire.co.uk/new-model-adviser/news/pims-2017-cutting-platform-charges-will-hit-service-7im-warns/a1016610?re=46660&ea=390363&utm_source=BulkEmail_NMA_Daily_Summary&utm_medium=BulkEmail_NMA_Daily_Summary&utm_campaign=BulkEmail_NMA_Daily_Summary

FT report on the new Vanguard platform that looks like slashing the cost of fund ownership;  https://www.ft.com/content/6821ce50-3976-11e7-821a-6027b8a20f23


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to “No more junkets if you cut our margins” – IFAs warned.

  1. Brian Gannon says:

    Not sure why IFAS would be allowed to go on such a meaningless jaunt? Surely that’s what the inducement rules are designed to stop. I’m signed up for the Peterborough seminar and looking forward to buying my own lunch and listening and participating in a great debate. Looks like a superb event content wise.

  2. henry tapper says:

    Yes Al is doing a great job and I’m looking forward to chairing. I was with Michelle Cracknell yesterday and I think her session will be a highlight- thank goodness for Al!

  3. Verona Smith says:

    Hi Henry,

    Whilst I recognise that charges will be coming down in the platforms space, and this is to be welcomed, it also needs to be recognised that there is a fine balancing act between costs and service. That said, we would never want to compromise on our service to clients. The remark about how quickly I may pick up the phone did not form part of my presentation – it was an off the cuff private conversation between me and an adviser. In retrospect, it perhaps made the point more dramatically than intended – it certainly was not a veiled threat. 7IM’s platform service is consistently highly rated by advisers, and whilst we’ve never claimed to be the cheapest, we think we provide good value for the quality of service we provide. Maintaining a high quality service in a world where charges look set to come down will be a fundamental issue for platform providers, but that is not to say we aren’t up to the challenge.

    Best wishes,

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