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Restricted Lighthouse reveals provider ties

by Jun Merrett on Jan 09, 2013 at 07:52

Restricted Lighthouse reveals provider ties

National advice group Lighthouse has revealed the provider ties that will power its restricted proposition in the retail distribution review world.

Lighthouse has struck deals with a number of providers including F&C Asset Management, BlackRock, Threadneedle, Seven Investment Management, Brooks Macdonald, Zurich and Aegon.

Lighthouse Financial Advice, the national arm of Lighthouse Group, has built a series of mandated panels for active, passive and discretionary fund managers, and platforms, with up to five providers on each.

The 160 advisers in the firm must use the panels when recommending a product to clients.

Malcolm Streatfield (pictured), chief executive of the Lighthouse Group, the parent company of Lighthouse Financial Advice, said: ‘Throughout 2012 we looked at researched panel solutions and from that we have selected a number of counterparties to work with. It may be restricted, but it has most of the well-known names [in the fund management industry].’

Streatfield said all the platforms on its panel were owned by life companies due to their financial strength and investment in technology.

He added that the group planned to launch a web and telephone-based execution only offering later in 2013.

36 comments so far. Why not have your say?

Paul Barnard

Jan 09, 2013 at 08:29

So they are tied. Or, tied and restricted? It is so easy for clients to grasp. isn't it?

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Anitaki

Jan 09, 2013 at 08:49

Or "restricted Independent" which is Orwellian newspeak for bondflogging

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Gillian Cardy

Jan 09, 2013 at 09:02

Restricted is all you need to know.

Tied doesn't exist any more.

Restricted Independent is meaningless.

Well-known names?? That will avoid any disasters then ...

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EVHE

Jan 09, 2013 at 09:03

Intrigued by the platform choice. Two well know strong organisations in Zurich and Aegon but also two platforms that are very new to the market with limited track record....interesting !

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Jonathan Kirby

Jan 09, 2013 at 09:12

So much for clarity in the post RDR world.

How could any organisation get something so fundamental so wrong?

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Alan Lazenby via mobile

Jan 09, 2013 at 09:13

Welcome to the new multi tied! Oh I mean restricted.

Yes Mr client I would love to invest some of your money with Neil woodford, however I've restricted myself for your benefit and would like to offer you a lesser fund. Here's my bill, that's right it the same as if I were independent:/

Restricted to five companies, well that makes research tough. Yes, here's my panel Sir, thank you. I will use it myself since you think it's best and avoid paying you then.

Why not thirty or forty providers? Because the kick back.would be less?

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Keith Cobby

Jan 09, 2013 at 09:26

Back to the future. I agree with Alan and , as I posted yesterday, it will take one more heave by the FSA to sort it out

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Alistair Blyth

Jan 09, 2013 at 09:28

Why have a headline that says 'Lighthouse reveals' and then produce an article that only says 'including'? It would have been better reporting to reveal the full list as this would show what 'other well known names' were missing, and just how Restricted they actually were.

Either way, it's all about trying to chugg business through as quickly as possible, and to hell with the best interests of their clients.

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Hickky

Jan 09, 2013 at 10:02

So here is another marketing group that will train their salesmen to state 'We chose to restrict our advice to the products of F&C Asset Management, BlackRock, Threadneedle, Seven Investment Management, Brooks Macdonald, Zurich and Aegon. We chose these because we can be specialists in these firms, their propositions and give you, Mr Customer, an expert service that those who chose to advise on the whole of the market, cannot. Therefore as specialists we feel the level of service is first class, but we are often cheaper than a lot of Independant advisers.'

The FSA must ensure this type of spin is not allowed, and an approved script must be used on first meeting a potential client, and deviation is a breach, with fines for the adviser and his/her supervisor. All first meetings must be recorded for training reasons.

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Jonathan Kirby

Jan 09, 2013 at 10:06

@ Hickky

Forget it, it will never happen.

Just concentrate on doing the best for your clients. After all probably most of what they pick up will be those clients then banks are no longer preying on so I suppose there may be some consolation that they should still receive better advice than before.

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Richard Anderson

Jan 09, 2013 at 10:21

My understanding of the old 'tied' system was that a tied adviser could not give advice on products from any companies other than their own. I would guess that this has carried through to the 'restricted' model, and so I wonder how a restricted adviser who was previously independent, can go back to one of their clients in future and recommend a switch out of a fund that isnt on their restricted list in favour of a fund that is on their list? Likewise, how do they justify recommending that a client should stay in a fund that is not on their restricted list?

Would the conversation not go something like 'Mr Jones, I have reviewed your portfolio. Of the 17 funds in your portfolio 9 are on my new restricted list and the other 8 are not. Of the 8 I recommend that you switch out of funds A,B and C and switch the proceeds into funds 1,2 and 3. You should keep the other funds D to H. I must add, however, that by giving you this advice I have made recommendations (to either sell or hold) on funds that are not within my regulatory permissions, so I have broken the FSA rules. '

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philip brown

Jan 09, 2013 at 10:29

And lo it came to pass that SJP ruled the post-RDR world.

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Jonathan Kirby

Jan 09, 2013 at 10:47

@ Richard Anderson

It depends what flavour of restricted advice is given.

Restricted whole of market - no problem

Restricted panel - possible problem

Restricted single provider definite problem.

I did warn the TSC about this in my submission as well as the DeaFSA but as usual nobody listened.

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JBT

Jan 09, 2013 at 11:23

What you chaps miss is that restricted means you do not want to advise on all products like occupational pension scheme transfers and ETF, IT, VCT and EIS.

You are still “independent” as to who you choose to offer the product in the normal way for all other types of business.

Also having a panel or preferred companies just means some of the due diligence has been done for you but if you wish to “go away from” the panel then thats your call as an adviser.

Its not a SJP offering where the funds and products are chosen for you and there is no other choice.

Get with the new terms please, Restricted is just on the range of advice it can offer.

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Jonathan Kirby

Jan 09, 2013 at 11:31

@ JBT

No, you are wrong. There are three types of advice all termed restricted and only restricted whole of market is like old independent but without the niche products.

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Sam Caunt

Jan 09, 2013 at 11:33

JBT - please refer to Jonathan comments above yours. If you restrict providers, you restrict perfectly acceptable products to the potential detriment of the client.

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Alan Lazenby via mobile

Jan 09, 2013 at 11:40

#JBT

Sorry, Restricted is exactly that,Restricted.

It's a lower standard of advice than independent and being independent does not mean you have to look at everything for every client. If you rarely deal with pension transfers then you can still pass this on to another adviser who does it day in day out. Being independent means having all available options for your clients. Being restricted to investments whole of market means you will need to pass everything else off to someone else.

Lets not try to put lipstick on a pig, restricted is multi tied by another name, it's not equal or close to independent advice, end of!

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Jonathan Kirby

Jan 09, 2013 at 11:50

@ Alan Lazenby

For the vast majority of middle market clients restricted WOM can be just as good as Independent as they are unlikely to be suitable for VCT's ETFs & the like.

This all goes to show up RDR for the shambles it has become.

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Alan Lazenby via mobile

Jan 09, 2013 at 12:51

@jonathan Kirby

Not if they don't advise on pensions or protection Jonathan. Restricted to just Wom investment means just that. What happens to true holistic advice?

I'm looking after a trust case for a business client who also needs personal pension and family protection advice, that's before we look at the business needs. Hence whole of market for all the various needs and not restricted to one advice area no matter if its whole of market.

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Jonathan Kirby

Jan 09, 2013 at 13:34

@ Alan Lazenby

But most restricted WOM will of course offer pension, trusts etc., and protection unless investment linked is outside of RDR anyway.

As stated above all RDR has done is blur the situation.

We have retained independent status but see no problem with restricted WOM as 99.9% of our client needs can still be covered.

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Michael Middleton

Jan 09, 2013 at 14:21

Like most commenting on this article I don't have a clue what precisely Lighthouse and its advisers will be able to provide clients from the panel chosen. This however does not seem to prevent many assuming they know everything.

Is it not the case that Brooks Macdonald provide a full discretionary portfolio service, which no doubt requires them to be completely unconstrained in the assets they may include and funds they choose from? As a specialst asset manager with the capability of research etc they are likley to offer a more effective solution for investors than most small IFA firms with limited research capacity relying on tools such as Analytics. Lighthouse may not be offering this, frankly I don't know and neither do others commenting.

@ Alan Lazenby - I may need surgery on my right foot, I neither want my GP a general surgeon or a standard orthopaedic surgeon to perfrom the operation, rather a specialist in Podiatric surgery. It is difficult to get more restricted than that, furthermore he costs more than the general surgeon.

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Paul Barnard

Jan 09, 2013 at 14:43

@Michael, quite agree re the foot operation, but we aren't talking about medicine and the comparison is weak. However, staying with your analogy, what you don't want is for the GP to offer to operate on your finger instead as he only does finger operations.

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JBT

Jan 09, 2013 at 14:51

@Michael - Well I do know because I work at Lighthouse and am well aware of the panel and the ability to go WOM if needed. I have been an IFA for years and do not see any restriction in the advice I can give to 90% of all my clients.

Funny you mention Brooks Macdonald because they are indeed one fo the chosen providers together with several other DFM's of course.

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Michael Middleton

Jan 09, 2013 at 14:59

@Paul, excellent point and you are of course right. However what you describe is an issue of integrity which rather like virginity is something you either have or you don’t.

No amount of titles, qualifications or advice model will cover for those without scruples. My point was those remarking that independence means superiority are frequently wrong, especially where specialist advice is required.

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Hickky

Jan 09, 2013 at 15:19

@JBT

Please don't fool yourself that any advice you give is even 40% as good as someone genuinely offering IFA services. Because your own flawed business model confirms you care more about your own income than the advice given to your clients. By taking the easy way out by accepting restrictions placed upon your advice by an outside agency that you have contracted to that provides certain services to you, unconcerned about what incentives have been provided to your network in exchange for listing, you have shown yourself up as someone who does not have the best interests of your clients as your top priority. I have over 50 DFMs to look at, they each offer slightly different services and look at different methods of investing, how many do you have? I can access a multitude of providers, find the best platform, or none, to suit my clients investments and needs. I will consider investments outside the mainstream if that is what my client needs, and I consider these type of investments for all my clients, mind you to most I will feel they are not justified, but at least I will consider them. Will you?

I can accept a position of a restricted adviser who specialises in only one specialist area of advice, such as pension splitting for divorce, or group pension advice, but for someone who is a generalist, going restricted in indefensable.

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Hickky

Jan 09, 2013 at 15:38

@ Mike Middleton

Somehow you sound as if you have been trained into thinking that group restricted advice relying on centralised research is necissarily better than investment advice that is bespoke tailored to each individuals needs. It clearly is not as any prescribed solutions are there to minimise complaints for investments sold by an inadequately trained sales force. As such they are similar to fund of funds or manager of manager investments that have proved to be largely ineffective and over costly for clients with diminished returns for the chosen level of risk. If you can't do a decent analisis of an investment and match the investment with your client's needs, don't give any advice. You can certainly use DFMs if you need access to investments such as direct equity and bond holdings as well as commercially tradeable SCARPS etc, but dont use them if all they do is invest in mutual funds, that's your job, and if you can't hack it, dont advise.

Being an adviser is not about selling product and outsourcing the specifics to someone else, that's just lazy. With your attitude, you might as well work for SJP.

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JBT

Jan 09, 2013 at 15:52

@Hikky

Maybe you should realise that you have access to the same number of DFM's as I do! How many do you actually use, all 50? Perhaps you should think a little more before you slate your collegues. As commented before being an IFA and fighting to retain that title means you have offer and consider not the mainstream as you put it, but for example ETF's for every client. So whats the difference between a new IFA and a restricted WOM (as termed earlier in the discussion) well nothing for 90% of clients. There obviously will be a need for the more specialist and comprehensive advice in some cases but few and far between.

Where do you get off saying its all about money! it shows you know nothing about which you speak. I would hesitate but retort back with that to be a true IFA in the comming era will be so complicated that few will actually be able to complete the due dilligence to offer the "full" range of advice and investment scope available. Those that do will be dealing with very high net worth individuals just to make the time and research cost effective.Good luck to them.

I for one have made a sensible decision to look at my clients, realise they are Mr & Mrs normal and therefore ristricting the products I can offer, but not where I get the invetsments from is a very sensible one that I am very comfortable with knowing i can truly live up to to a knowledge of what I offer and not pretend to know everything.

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Keith Cobby

Jan 09, 2013 at 16:08

It would be very interesting, if not revealing, to see a list of the personal investments of the advisers/posters on here, particularly the 'tied agents'.

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Hickky

Jan 09, 2013 at 16:17

@JBT

Just as I thought, you are in denial and are either nieve about the interests that sold you the concept of restricted, or plain lazy.

Which is it?

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Dave

Jan 09, 2013 at 17:01

Hi Mr Client, I'm a Financial Adviser. For regulatory reasons, we have decided to be restricted whole of market advisers. A bit of a mouthful I know, but what it means is that we can offer advice across the whole of the market for most mainstream products. This will include pensions, OEICS, ISA's, SIPPS, Investment Bonds (both onshore and offshore). We can't adviser on Bollivian Teak Funds or high risk tax strategies, however frankly we never did before and wouldn't want to. If you need that kind of thing, I would be happy to refer you to somebody who can.

We have also invested in team of investment specialists, they have scoured the market place and have come up with what we think are some of the best investment funds out there. Did you know there are 22,000 OEICS and Unit trusts, yet 90% of all investments are placed into just 100 popular funds? We think that we have selected the best investments available on our "panel" for investors like yourself. This doesn't mean by the way that we can't look objectively at any investments that you hold that aren't on our panel (in fact we have probably researched them as part of our panelling process).

By "restricting" ourselves to giving advice on products and investments that we think are right for our clients, we are able to research things more thoroughly, reduce our regulatory and insurance costs (which make us more competitive) and give you the more focused advice that you deserve.

Sounds quite compelling to me.....

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JBT

Jan 09, 2013 at 17:46

@Dave

Sanity restored ............... well put Dave

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Gillian Cardy

Jan 09, 2013 at 19:32

@JBT - unless the article is wrong, and it could of course be, the part of the article which is important is the sentence "the 160 advisers must use the panels when recommending a product to a client". So it doesn't sound to me like you can go off panel at all.

The FSA had a working definition of a panel which said a range of products or providers selected as meeting a firm's criteria.

The key word here is "firm". When a panel is created using a firm's criteria and the adviser cannot go elsewhere if the client's criteria differ from the firm's criteria then you are a Restricted adviser. Of course, in some cases the criteria will be aligned ... but if you cannot or will not use anything not on the panel you're Restricted.

@Michael Middleton : correcting your comment about DFM - they are not obliged to be Independent, nor even whole of market in their own field ... they could be Restricted too (e.g. only using in house funds, not using passive vehicles) - though this distinction is likely to be blurred because if they really are Discretionary then Discretionary is totally outside RDR as it's not personal recommendations (which also means they can keep taking the commissions!!)

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Hickky

Jan 09, 2013 at 20:04

@Dave

Hi Mr Client, I'm a Financial Adviser. For regulatory reasons, we have decided to be restricted whole of market advisers. A bit of a mouthful I know, but what it means is that we can offer advice across the whole of the market for most mainstream products. This will include pensions, OEICS, ISA's, SIPPS, Investment Bonds (both onshore and offshore). We do this because we are mainly owned by either an insurance company, or private equity and by doing this we can extract more profit from your investments to satisfy overpaid executives from our firm and the corporate greed of out investors. We will not consider investments that have not paid us in one form or other to be on our panel, but we do have some firms on the panel that are approved just to satisfy whole of market regulations, however the choices are limited.

We have also invested in team of investment specialists, they have scoured the market place and have come up with what we think are some of the best investment funds out there as long as they pay us more, or reduce their fees so we can charge you in other ways, for example above average platform charges from our white labeled service.. Did you know there are 22,000 OEICS and Unit trusts, yet 90% of all investments are placed into just 100 popular funds? This is because restricted advice has been within the advice industry for many years and is a consequence of poor practice over many years. We, as a firm with responsability to our shareholders fully endorse the status quo and will keep advising on this small selection. It is noticeable that a good IFA will research a much larger range, and often uses more than these 100 funds as they tend to be investments with huge sums invested and cannot be versitile enough to target specific investment areas, and are likely not to provide the best returns available from any asset class.

We think that we have selected the best investments available on our "panel" for investors like yourself. This doesn't mean by the way that we can't look objectively at any investments that you hold that aren't on our panel (in fact we have probably researched them as part of our panelling process), but do not endorse these investments and will probably use this as an excuse to churn them anyway. We may also have our own risk managed in-house funds that have been RDR compliant for a number of years, consist of full whole of market investments including ETFs and trackers, but represent poor value for money as the charges are exorbitant. Sometimes we white label funds with our own name infront as we can extract more fees for the company this way.

By "restricting" ourselves to giving advice on products and investments that we think are right for our profits, we are able to research investments that make us more money more thoroughly, reduce our regulatory and insurance costs (which make us more profit) and give you the less focused advice that you, who have no clue about what is going on, deserve.

Sounds quite compelling to me.....

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Anitaki

Jan 09, 2013 at 20:53

This reminds me of 20 years ago

The Halifax had a subsidiary company (HIFAL) for clients who insisted on receiving independent advice rather than tied from Halifax Life, (or whatever it was called at the time).

If somebody went to the desk in any branch and demanded ind, advice, they were referred to Hifal. If that client wanted a pension, the HIFAL man could only recommend a pension from the HIFAL pension panel list. On that pension panel list was just one company's name. So much for "independent advice" and panels

Oh, the name of the one company on HIFAL's pension list??

N.P..I.

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JBT

Jan 10, 2013 at 09:16

@Gillian

The article is indeed incorrect and the comapny have sent a note to Citiwire to that effect. Whether that ever sees the light of day is anybodys guess. Yes we can go "off Panel" to where ever we see fit. Although the Panel was designed to cover the lion share of the buisness that was already being written, products and funds etc.

Final thought from me ... when I often read these replies its amazing how as an industry I have met some of the most caring people ever who genuinely sweat blood and tears to find the right solutions for their clients. Its an industry I have been in for 20 years now, since early20's when I choose it as a career. How will we ever gain respect from clients and professionals when our own collegues do not even respect the way we help clients and work.

Its always amazed me at the narrow minded jumped up attitude of some who always thnk they are superior to others and better in every way.

Oh well I guess it will always be that way ......

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Dave Knight

Jan 11, 2013 at 16:44

In support of JBT (who appears to be defending the Lighthouse corner all on his own here) may I proffer the following info.

1) The article is indeed incorrect as the statement that Lighthouse advisers "must" use the "panel range" is wrong. There is still an option to use anyone if the adviser does their own research. No problem.

2) 41 Actively Managed funds from 13 providers, 17 Passives from 5 providers, and 8 DFM's - all pre-vetted and approved, should suit 80-90% of potential clients in the real world.

3) I can opt out of this if I want.

And that's only the investment options, more exist for pensions etc. Yes I am a Lighthouse adviser, and yes I think the proposition is a good one for ALL concerned, including the clients, as the processes involved save time and (ultimately) money, with no detriment.

I don't advise on EIS's, VCT's or (for that matter) mortgages, so I would have been restricted anyway, but only by product, not providers.

This whole argumant centres around an incorrect statement by the writer of the article, which I note is still uncorrected. Well done Citywire.

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