The content from our weekly newsletter, Eclipse, received such a good reaction last Friday, that we decided to turn it into a blog… so voila! If you would like to keep up to date with more wonderful content such as this, then sign up to Eclipse at the bottom of this page.
Free provider TVAS. Inducement rules.
Let me provide some scenarios:
An adviser has a clear segmentation process, documented service propositions, platform due diligence and a centralised investment proposition*. He has three new client appointments. He does a full review of their financial situation and all three of them have defined benefit schemes, which require reviewing as part of their overall objectives.
Relatively simple needs. Bit nervy with markets. Likely to fall into the proposition that would recommend the PruFund Cautious. Pru offer a free TVAS service. Makes use of it.
Bit more complicated. Has some ISAs too. Likely to fall into the proposition that would recommend the Novia platform and some passive funds. Novia offers a free TVAS service. Makes use of it.
More complicated again. Has direct equities and likely to use the proposition that involves ETFs. Transact is therefore the preferred provider. They don’t offer a free TVAS service. Pays for an independent one, reflecting the likely platform/strategy.
An adviser’s preferred provider and strategy is Nucleus and Dimensional funds. But they don’t do free TVASs. So, in order to review a new clients DB scheme, he gets Prudential to run a TVAS for free. It’s not entirely accurate (fund and provider charges are different and it can’t take account of the expected growth on the recommended strategy) but he uses it to get a feel for the value of the DB scheme and it provides the basis of his advice.
An adviser has used Aviva in the past. He hates them. Thinks their platform and service is rubbish. BUT they have launched a service to provide free TVASs, and he really doesn’t want to have to pay for them. Plus they did a really good golf day recently. So he decides to stick a few clients with them. Makes his life easy.
Scenario A – shows that providing this sort of support to advisers can work, if not abused
Scenario B – shouldn’t happen. Really shouldn’t. For obvious reasons. But I’ve seen with my own eyes that it does.
Scenario C – I would like to think is a fairy-tale. I really would.
Hence the need for the FCA to take a firmer stance on it. Because although there may be some of the first lot happening, there’s definitely some of the second lot happening, and the worry is there’s some of the third lot happening. And the only way to prevent it? Take it away from everyone.
My advice to those who were using these services; if you have the resource, get some training and do it in house. If you don’t, pay an independent firm to do it. It shouldn’t be an ‘extra’ cost. It is an essential part of the service being provided, and should be treated as such.
* these may look like big words, but they are, I would argue, essential in a modern financial planning firm. If you don’t have these already, get them sorted soon.