Chamberlain: IFAs need confidence to show they merit fees

16 July 2010 8:00 am | By Chris Salih

Succession Advisory Services chief executive Simon Chamberlain says many advisers will swap commission for fees to meet the retail distribution review requirements but continue with the same patterns of behaviour.

He says: “Some firms will still try and flog policies and charge the client commission and dress it up as fee, which is definitely not what the RDR is about. They have done this for 30 years and will continue to do so.

“We have been through this before with commission disclosure. That was meant to be a transparent system to guide the client into a system of independence and was heavily abused by the IFA community.”

Chamberlain says he has formed this view after meeting with 200 firms since the launch of his consolidation vehicle Succession12 months ago.

“Many of those firms still portray old-style behaviour and have similar characteristics. For example, the owner of a business with 10 registered individuals has no influence over the other nine or what they do with their clients. It is 10 separate businesses sharing a brand and the only thing the owner is consolidating is liability.”

Chamberlain says Succession is ahead of its target as it approaches its first anniversary, having recently concluded deals with Westminster Financial Planning, Lynas Vokes Investment and Fiducia Wealth Management. He says 30 firms have now joined Succession, representing £5bn funds under management.

The success will see it close its doors to new member firms by the end of 2010. Chamberlain says: “We originally thought 85 was the target number of firms, with an average of £70m each of assets but the average firm has had closer to £150m, which means we have had to review our targets down to 40 or 50 firms.”

Once closed to new members, Succession will look to grow staff numbers with new advisers. It is setting up a central processing unit to offer admin and paraplanning functions, which it believes many firms are lacking.

Succession has applied for FSA authorisation but is still waiting for this to be granted. Chamberlain says: “I am a big believer that all consolidators should be regulated. The ones that are not applying for regulation need to take a long hard look at themselves and the public should be asking them why. I do not see how any consolidator that is not regulated can honestly say it is not affecting the way the businesses it acquires operate.”

Chamberlain believes the predictions of a mass exodus of firms in the wake of RDR will not materialise. He says: “The worst scenario is that a number of practice principals become unauthorised owners of the business, meaning they will not be giving advice any more. That is probably a good thing.”

Chamberlain considers the IFA industry is too fragmented on representation and believes there should be a unified body to reflect IFA interests.

He says: “You have egos claiming to represent different parts of the advice sector. They all claim to represent the whole industry but none of them do. They represent their own jobs.”

Chamberlain says if Succession’s plans work it will have moved 50 firms with £7bn to a 1 per cent charging structure across the funds and the business will be generating £70m in recurring income from client fees. He says other models indicate the business should be worth at least £500m, which will all be owned by members.

He says: “We are inundated by international interest and have been approached by four multinational institutions in the past few months who have wanted to be involved in this project as investors or owners.

“This business has proven beyond all doubt that IFAs are able to create capital, they just need more confidence to go out there and shout from the treetops that they are professional, have quality and deserve the fees they charge because the service they give is truly independent and well researched, which is what Succession gives its members.

“It is fine to make large amounts of income and capital as long as the client is at the centre of that proposition and has an improved service.”

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