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Should you be concerned about the rise of vertical integration?

Since pensions freedoms were introduced in 2015, the financial advice world has seen an increase in the demand for advice, as well as an increase in demand for distribution from product providers. Over the last year, many product providers and advice businesses have moved to owning multiple parts of the value chain or have established firmer links between the different links of the chain.

It seems that a new era for the investment distribution landscape has started, with an increase in advice businesses operating their own platforms, discretionary portfolios or advice technology, as well as product providers introducing their own inhouse financial advisers.

The growing concerns centred around these vertically integrated arrangements are driven by cross-subsidisation across the value chain, which at times is satisfied by premium costs paid by clients for technology/platforms and investment management. This, coupled with the threat, and at times contractual arrangements, that remove the advisers’ ability to claim any client ownership have led to the following findings:

  • For those advisers using outsourced investment solutions, recent research from Liontrust found that 91% of respondents say value for money is most important when selecting an outsourced investment partner. When determining what is meant by value for money, 73% of respondents cited it as being the best return for the best price.
  • After value for money, excellent administration (60%), superior service (50%) and good quality reporting (42%) were reported as being important.
  • As well as costs and service being important to advisers, transparency is of concern, with 43% of respondents saying they do not believe investment partners are transparent enough when it comes to fees and charges.
  • When using outsourced investment solutions, a major concern for advisers is that a third-party investment manager could seek to solicit their clients if they also operate an advice business. The one-stop-shop approach has been strongly criticised by many advisers who feel that it goes against the spirit of the Retail Distribution Review (RDR) in particular.

If the consequences of vertical integration are of concern to you, Sandringham Financial Partners are Independent Financial Advisers and proud to be commercially independent.

At Sandringham, we have a new style partnership which offers:

  • independent financial advice and we are proud to be commercially independent (no vertical integration).
  • in-house paraplanning and Sandringham administration service (SAS).
  • professionally-packaged client marketing.
  • our Wealth Platform Client Portal, providing live valuations across the market.
  • our adviser designed back office system, Enable.
  • experienced head office Partner support team.
  • an ‘independent and impartial’ view on the market – over 280 agencies and data feeds across the market, meaning there is no requirement to move client monies at any point.
  • fully guaranteed PII (no excess liability, now or in the future).
  • Sandringham provides 120 investment options from 31 fund managers, including RSMR and Fusion within the core investment proposition.
  • free of charge business growth/planning support.
  • Learning Academy providing study materials to Chartered level, CPD tools and tracking, and provider information and guidance.
  • recognition that ownership of clients stays with our Advising Partners.
  • quarterly Partner events and regular informal ‘best practice’ meetings.
  • a true Partnership culture, designed to support you and your business to provide great client outcomes in an environment where we do not take a penny from investment partners, platforms or technology providers.
  • a unique, MiFID ii/PROD compliant, market leading, client review process, which eliminates Advisers admin time and maximises the engagement between adviser and client.

More advisers are choosing to join Sandringham. We’ve been working hard to make the decision to join us an easy one by being a progressively minded company, intent on doing the right things well, with the client at the heart of everything we do.

If you want to see how Sandringham can help you to build a proficient, profitable and future-proofed business, why not join us at one of our experience days https://recruitment.sandringham.co.uk/experience-days/ or speak to us here https://recruitment.sandringham.co.uk/speak-to-us/.

 

Sources

https://www.ftadviser.com/investments/2019/08/14/advisers-fear-poaching-by-vertically-integrated-firms/?page=1

https://www.moneymarketing.co.uk/the-future-of-vertical-integration/

https://www.liontrust.co.uk/adviser-research-report/advisers-call-for-increased-transparency

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