He added: “The idea of an independent financial adviser is very nice and quaint, but it is no longer sustainable when you are reliant on third parties and have PI insurance issues. If you outsource products and services to other providers and rely on PI cover, which tells you what you can write and how, then how is that independent?”
Drawing from personal experience, Mr Morley said that when he ran English Mutual, the business operated on a year-by-year basis and was dictated by the PI renewal dates. And judging by the current state of the PI market, he predicted that the great insurance crisis of 2011/2012 could soon return, which would damage the business prospects of advice firms that cannot self-insure.
With all of this uncertainty facing the industry amid mounting PI costs, he said that many clients may be fearful of adviser firms folding and prefer to go to a company that is accountable and not outsourcing investments to a third party. However, he said that this had nothing to do with the perceived negativity surrounding the term restricted, which was simply a “red herring” in the profession.
He added: “The terms independent and restricted will fall away and have less significance. It is a red herring. Consumers are not concerned about it; it is more of a concern for IFAs.”
My Morley was quick to praise the retail distribution review for “shaking out the rubbish” from the profession, and defined regulation as the industry’s “friend”. Although it was still too early to say whether RDR had been a success, he was pleased with how it had created a “barrier to entry” and felt that this made up for the expensive nature of increased regulation.
He said: “In the 1980s and 1990s there was an influx of people who should not have been advisers, which was a result of weak regulation. We now have a high barrier of entry. It is expensive, which is disappointing, but it is good that it has shaken a lot of the rubbish out of the industry.
“Regulation is our friend. We know what happens in markets that have not been regulated. We have a set of rules that are fairly clear and the regulator is listening, which is a good thing. As a profession we are starting to understand ourselves, but I am still concerned that a lot of organisations just see consumers as an income opportunity, especially by consolidators who sell client assets to the highest bidder.”
Daniel Liberto is a former features writer at Financial Adviser
Career ladder
October 2013-present: Chief executive, Sanlam Wealth Planning – the merged English Mutual Group and Sanlam
