Bank return to advice is a rare case of sequel eclipsing original

The banks are undeniably back in advice. In February, news broke that NatWest had agreed to buy wealth manager and financial planning business Evelyn for an impressive £2.7bn, one of the largest wealth management deals in recent years.

The news was met by a not insignificant level of scepticism from financial advisers; most of whom remember the last time banks were operating on their turf. Pre-RDR, during the 90s and early 2000s, UK high street banks were among the largest providers of financial advice.

Operating a largely commission-driven model, it was certainly an imperfect set up compared to the standards we expect today. Following the introduction of RDR in 2012, it no longer made sense for banks to offer advice because doing so had become relatively high risk and expensive. The banks quickly withdrew, leaving a market populated almost exclusively by IFAs, wealth managers, restricted networks and consolidators. Until now.

I understand why some advisers are concerned about the return of the banks. We mustn’t forget, however, that past performance is not indicative of future returns. I, for one, am feeling optimistic, particularly about banks’ ability to close the advice gap. I think the banks re-entering the market in 2026 could well be a rare case of a sequel eclipsing the original.

A different environment

For a start, today’s regulatory environment is very different to that of the 90s and early 2000s. It’s obvious that commission-based structures do not produce the best outcome for the end customer, which is why RDR did away with it back in 2012. Today, Consumer Duty exists, which has raised the bar and clarified expectations around fair value and client outcomes. Banks entering the market today do so with stronger governance, clearer fee disclosure and mature compliance frameworks. Mis-selling and unsuitable recommendations at any scale simply won’t wash.

Then there’s today’s technology, which will allow banks to better serve the mass affluent at a rate that is sustainable and inexpensive. Today’s technology allows advice to scale thanks to the likes of digital onboarding, online fact-finds, e-signatures and automated responses to changes to forecasting. It’s also worth considering the wealth of customer data that’s owned by banks. Advice policy frameworks have been developed, and the best organisations embed that policy within their advice tech.

Open Banking has fundamentally changed data portability in the UK, reducing data gathering friction and allowing for advice to be given faster. And consider the amount of data banks hold on clients directly – even without the need for open banking – often a whole lifetime of history and family connection, not to mention absolute real time visibility on payment which could be used for fact finds, nudges, or simply to understand regular payments for savings.

Losing business to the banks could be an area of concern for financial advisers. Once again though, I don’t think this is something that should be keeping any anybody up at night. I think there’s room in this market for both ways of operating.

Most banks and financial advisers will be serving vastly different customer bases. The banks will likely focus on the affluent market – those with some investible cash, but without enough to seriously consider talking sophisticated, holistic financial advice. Most client in this bracket don’t need it either. The introduction of the Targeted Support regime, which allows firms to make financial suggestions and recommendations to groups of people with shared characteristics and financial needs without straying into individual advice, only underscores this further.

There will be exceptions to this rule of thumb – NatWest, for example, will benefit from Evelyn’s full-service advice proposition, and there’s also every chance more banks follow suit and acquire other large wealth managers. The opportunity is to scale these well-developed propositions and leverage the low cost of client acquisition. Getting enough clients isn’t the challenge for banks – it’s how to serve those clients profitably.

Even if we acknowledge that and accept it as a possibility, concerned advisers would do well to remember that demand for advice outstrips supply. Most advisers will continue to focus on wealthier individuals with more complex needs who would benefit more from personal relationship-led advice. The demand for personal financial advice, which boasts priceless value like offering peace of mind, is going nowhere.

It’s also worth pointing out that the sector is evolving, thanks to new technologies that allow advisers to serve more customers at a lower price point. Using these technologies helps level the playing field between smaller advice firms and big behemoths, without sacrificing the personal touch offered by a smaller firm.

A new era

The first era of bank-led advice was product-driven, commission-funded and operationally expensive. By contrast, the sequel is emerging in a market defined by explicit fees, digital infrastructure and far tighter governance. This distinction matters.

The UK today faces rising household wealth, greater retirement complexity and a persistent advice gap, alongside an ageing adviser population with finite capacity.

The year is not 2005. Banks are entering a structurally different environment in which technology continues to lower costs, data sharpens targeting and regulation enforces clearer client outcomes. The reintroduction of the banks could mean broader access to advice and guidance without diluting professional standards.

The original script showed us what not to do. In today’s environment, with its regulatory maturity, better technology and better guardrails, there’s every chance the sequel is better than the original.

This article first appeared in Professional Adviser.