Libertatem would suggest: The UK adopts the MIFID II definitions which make Independent” advisers. Fee based, whole of market and Independent of undue influence via ownership or other agreement. This would allow most restricted advisers to re-join the Independent camp

Under MIFID II: Non-Independent advisers can receive commission, use panels of providers etc. As long as this is properly disclosed we feel that this may well provide access to advice for some of those who were disenfranchised by RDR. It may make sense to remove the term “Restricted” and use the term “Regulated”.

Adopting MIFID II definitions would both realign the UK with Europe but also use terms which are more easily understood

That all the stakeholders agree a set of definitions for advice and guidance which are used by all to improve communication and avoid many of the current misunderstandings.

Q3: What comments do you have on consumer demand for professional financial advice?

Thanks to THR2: We know that the historical market for Independent Advice was 16m. We also know that advisers could be split into three specific groups.

THR2 Identified the numbers of clients under each definition

Boutique advisers enjoy a per adviser range between 10 and 120 although the current average is 159. This is likely to drop significantly.

Segregated Adviser will be the way forward for the adviser who wants more than a lifestyle business as it can offer a capital exit in the future. The current per adviser average is 191

Generalist/Transactional advisers currently show 205 active clients per adviser. But they also have another 400+ old clients who may return.

Most of the 3,250 who have exited the sector since 2010 have been Generalist adviser and some had client banks in excess of 1,000 clients

Libertatem suggests: At least 4m consumers seem to have successfully made the RDR transaction to fees. Circa 2,500 – mostly attached to generalist advisers - may be less secure particularly if we continue to see Trail Commission being reneged on by providers.

If we are to see a reconnection between advice and the 10m ex IFA clients, we will need to recreate the new version of the commission based market (See National Advice Service)

# Q.4: Do you have any comments or evidence on the level of demand for advice from sources other than professional financial advisers?

There is no shortage of PR noise from a number of investment platforms that seek to deal directly with the client. But currently there is little evidence that this noise is converting into profitable business. Such firms will have resolved the matter in the next 3 years. Either they will have reached the tipping point into profit or their investors will have given up.

The missing link of many non-advised options is “the Challenge”.

This is the first step to a client making private provision and the most important aspect of an adviser’s day. The challenge comes twice in any client relationship. Firstly, when a client is challenged to seek advice and secondly when the client is challenged to accept the solutions are suggested.

This challenge can only be done by human interaction. We do not see it being done by computers, Robo Advice or other androids. It is possible via Skype but better achieved face to face. Much of the enthusiasm for new processes presumes that clients will challenge themselves – this is unlikely and unproven.

The price of RDR’s commission free world is the removal of that challenge from the common man and with it any independence from the state when in need.

# Q5: Do you have any comments or evidence on the types of financial needs for which consumers may seek advice?

RDR has sought to push the adviser community towards the Boutique model. It presumed that all clients wanted an intimate relationship with their advisers in which there were regular reviews. In essence that the IFA sector should be restricted to financial planning.

The reality was that the vast majority of clients were transactional and wanted a once off or a once in a while advisory event or the solution of a specific issue. They did not seek regular connection. At the same time RDR sought to make all advisory firms the same and restrict their activities and the accessibility of advice

Post RDR - adviser firms had all the same qualifications and were trading in the same market using the same basic business model. So now advisers have difficulty distinguishing themselves from the competition.

Q6: Is the FCA Consumer Spotlight segmentation model useful for exploring consumers’ advice needs?

No appears to be a complete waste of money unless you are a regulator seeking to increase your empire

# Q7: Do you have any observation on the segments and whether any should be the subject of particular focus in the Review?

No