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Back to the bad old days?

IFA groups launching their own fund ranges in white-label ventures are under the spotlight this week following a speech by FSA director of retail policy Dan Waters last Friday.

Speaking at a Cicero Forum on platforms last week, Waters said the regulator had concerns over the growing trend for advisers launching their own fund ranges for signaling a “return to the bad old days of broker funds”.

But advisers and industry experts think Waters may be on the wrong track.

Broker funds had been slated as opportunities for advisers to cream off hiked-up and often undeserved basis points for, doing, well, very little at all.

And the many groups that have launched these ranges, outsourced to third party asset managers, have been quick to defend their strategies.

Last week we saw the launch of Intrinsic Financial Services’ first multi-manager foray, in conjunction with New Star Asset Management.

New Star has launched four new multi-manager funds to kick off the venture, which will be made available to other non-Intrinsic advisers through a number of platforms, once commercial terms have been confirmed.

Intrinsic says by distribution controlling more of the underlying assets of their clients investments, they are in a far less vulnerable position and are truly using their power to negotiate better value for their clients and build up more embedded worth in their businesses.

Also expanding its next phase is True Potential, having signed up 43 more firms, in addition to Positive Solutions, after recovering from the initial hiccups around data transfer.

TP is now being used by 1,840 advisers and says it has processed 11,818 registered individuals, with the total amount of the advice being worth over £17m.

TP managing partner David Harrison says as the advice market becomes increasingly fragmented, the need for a truly full service technology platform is more important than ever.

While consolidation seems to be on the rise with the larger groups, seeing more and more consolidation, TP says despite a decline in the overall number of registered individuals, the number of firms directly authorised with the FSA is diminishing.

And further evidence that recurring income streams are the way to go, with IFDS group executive, business development David Moffat telling delegates at Cicero’s platform forum that those advisers moving to a recurring income model have seen their business multiples increase substantially higher than those reliant on initial commission.

He said transactional advisers that rely on initial commission have seen multiples drop from 0.5 per cent to 1.5 per cent income to 0.25 per cent to one times the annual income.

This compares with those recurring income models have seen multiples soar from between one and three times income to as much as two to eight times, even in the last three years.

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