Advised or direct, Sipps are about saving, investing and income: the accumulation of money, investing for a return, and drawing an income in retirement (or buying an annuity). They are the ‘how’, and direct-to-consumer providers’ technology solutions are catering for the ‘how’ increasingly well. But they are not the ‘why’. Why is the saver doing what they are doing, why are they saving a certain amount, why are they investing in certain assets, why are they drawing a certain level of income?
To date, direct-to-consumer propositions have little stake in the ‘why’. Business models are built upon the acquisition of new savers, retention of existing savers, volume of investment transactions and, perhaps, new regular saving from savers. Few tools are available to deal with the ‘why’ because there is little need outside fulfilling the limited obligations laid down by legislation and the regulator. An online investment platform cares not if our novice saver simply wants to try to get a better return on their £30,000 or whether in fact this money is for something specific, a personal goal at a specific point in time.
Adviser stake
Advisers solve the ‘why’. They ask questions that savers often do not think of asking themselves and help clients arrive at the right solution for them. They react to the changing financial circumstances of savers and changing goals as time goes on. They understand legislative and market changes and help the saver change and capitalise on what is best for them. They help the saver understand the ‘why’ and bring it to life for their own individual goals.
But their value to the businesses that also provide direct-to-consumer solutions is in question. Advisers appear to have little additional influence on the business model drivers listed above, save offering some additional support to the acquisition of new savers. To some providers they may even be an inconvenience, requiring different service models to support them, facilitating their fees for work performed on behalf of the saver or additional regulatory reporting.
They are also in competition. Advisers can not only introduce new savers but they can also move them away. There has long been a sense of unease between advisers and providers who also offer solutions direct to the consumer. That has increased post-RDR as more and more providers who traditionally supported the advised channel also unveil their direct-to-consumer propositions.
The two solutions need not be separate – they should complement one another as both have the same saver at heart. But the direction of travel in the market seems to be the opposite, distancing them apart with savers segmented into one or the other. That risks not supporting the saver in the best way possible and certainly does not look to support the role of the adviser.
