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&#39Defined-payment system will cut IFA numbers to 500&#39

IFA numbers could plummet to just 500 if the FSA goes ahead with its definedpayment system outlined in CP121, according to res-earch by H2B.

The research, exclusively commissioned for Money Marketing&#39s G80 polarisation summit shows that IFAs predict they will find it impossible to operate under the defined-payment system if CP121 is implemented without amendment.

Advisers say they will be forced to multi-tie or become authorised financial advisers despite finding the multi-tie option “distasteful”.

Advisers, particularly those working for smaller players, believe they will be driven into business models that they are not comfortable with if DPS bec-omes compulsory for the independent sector.

Speaking at the G80 summit, H2B partner Sue Hayward said all indications point to a huge reduction in the IFA population, with just 5-10 per cent retaining their independent name. Some IFAs polled put the figure as low as 500 individuals.

The networks will be particularly hard hit as IFAs question the value of being a network member in a depolarised market.

Those polled believe that networks will offer packages to fit all adviser models from independent to multi-tied but H2B says the networks&#39 main opportunity for survival may be to adopt “killer multi-tie proposition” offering the terms and choice.

Hayward said: “The reaction to the demise of polarisation varies from the strongly emotional &#39they can&#39t do this to us, it&#39s not fair&#39 to the strongly rational &#39it&#39s business, we&#39ll deal with it, we always have&#39.

“Some IFAs even ack-nowledged that change is both timely and necessary but that it did not mean that CP121 outlined the best path.”

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