Santander UK is rebuilding its branch-based financial advice capabilities three years after the bank stopped selling structured products through its financial planning management unit.
The bank has been offering advice to new customers on a pilot basis over the last 12 months via a team of 200 financial planning managers which covered existing maturity work and new clients with the aim of having 225 advisers by the end of the first quarter of 2016, according to a bank spokesperson. "Santander UK retreated from the financial planning advice market in 2013," said the bank official. "At that time, we left a team of 50 financial planning managers who did maturity work and dealt with customers with existing portfolios. The new team of 225 advisers will be based in the bank's biggest UK branches. We think that's the right number for us, as it will give us one financial planning manager in every four branches of our 900-strong network."
The new financial planning management team will offer advice on Santander products, including wealth management and other financial products matters (including tax planning), and portfolio construction, including advice on the bank's own structured retail investments as well as corporate wealth management portfolio products and funds. "Santander UK will offer in-branch investment advice to clients with more than £50,000 of investable assets," said the official. "The cost of the advice is 2.5% of the amount invested, with a minimum fee of £500 and a maximum charge of 2.5% of £150,000 (£3,750)."
Santander UK's return to the advice market comes after the bank shut down its 800-strong UK investment advice division in March 2013, in the wake of a large fine inflicted by the UK Financial Conduct Authority (FCA) for giving unsuitable retail banking recommendations relating to structured and portfolio investments and investment bonds between January 2010 and December 2012.
Most British high street banks stopped offering investment advice around the same time, after the retail distribution review (RDR) came into force in January 2013. The review brought with it new guidelines on charges and commission fees around product sales and advice, and those deterred included: Lloyds Banking Group, which offloaded its mass market investment advice service in September 2012 and now offers advice only to customers with more than £100,000 to invest; HSBC, which axed its advice services in April 2012 while continuing with its whole-of-market advice and execution-only services; and the Royal Bank of Scotland, which closed down its independent financial advice (IFA) arm and moved to a restricted advice model.
Others relaunched their structured investments offering by using RDR-compatible products with unbundled, explicit and transparent charges that highlighted the value of structured products and how were priced without commissions. Barclays was the first big bank to halt financial advice to customers in its branches in January 2011, and stopped selling structured products through its specialised structured products provider subsidiary, Woolwich Plan Managers a year later on December 2012. The UK bank was also the first to migrate its structured investment products to an unbundled format, using third party wrap platforms and stockbrokers. Investec also unveiled a RDR model aimed at servicing the different adviser models in November 2012.
Santander is also "looking at ways to offer advice on alternative types of investments" to a wider audience through an online investment platform that will also be launched in the first quarter of this year. "The investment platform will be open architecture and provide investors with access to more than 2,000 investment funds available from across the market," said the spokesperson. "This service will be open to all investors (advice and non-advice) at a fee of 0.35% a year plus fund management charges."
Online investing is likely to represent 25% of the UK investments market over the next couple of years, stated Alan Mathewson (pictured), managing director, wealth management and private banking division at Santander UK in an emailed statement. "As a scale challenger, we want to be at the forefront of this trend, providing a simple and convenient way for our customers to access the investment market," said Mathewson.
The move reflects the bank's commitment to helping businesses and consumers prosper, said Alexia Kilby, senior marketing manager of wealth management at Santander UK.
The Royal Bank of Scotland (RBS) has also confirmed that will restart mass market retail investment advice from April. An RBS spokesperson said in a statement that, post-RDR, the bank offered investment advice to its customers with more than £100,000 to invest, though have temporarily stopped advising customers with less than £50,000 as it further develops its proposition. "We expect these developments to be completed later this year to enable us to better serve our customers," said the RBS spokesperson.
The FCA and the HM Treasury launched a the Financial Advice Market Review (FAMR) in the summer of 2015, a review targeted at improving consumer’s access to financial advice in the UK.
Related stories:
Santander sets £43m aside to cover SP claims, confirms 'low level of activity'
FCA fines Santander for serious advice failings
Santander UK stops SP advice sales, Cater Allen not affected