The demise of the small IFA has been trumpeted each year since regulation was envisaged. Those doing the predicting have mostly involved themselves in a mixture of pessimism and wishful thinking.
Regulators and product providers instinctively prefer the idea of a market with a smaller number of bigger traders, which they believe would be easier to service and control. Few of these have really thought through the long-term consequences of rationalising the industry's pluralist distribution.
In any case, such predictions have made little difference to small IFAs, who have stubbornly continued to trade, expand their businesses and improve their unique acceptability with clients.
So what is the shock new issue that is set to make the small IFA suddenly give up his business? In fact, there is no knockout blow coming out of left field, rather a reassembly of old pressures which could over time make the small IFA no longer want to continue in business.
The major pressure is the liability for previous advice, which has changed for the worst for all advisers, significantly altering the exit value of their businesses.
The pension review allowed regulators to expand the avenues down which clients could attack advice given in good faith in the past. The protection offered to the adviser by civil law was removed, both in terms of time limitations and of forcing the adviser to canvas for claims.
The provision of an ombudsman service that can invent policy on the hoof while allowing clients a free hit at their adviser at his cost has done little for adviser confidence and nothing for the confidence of PI underwriters. It is no wonder even the most competent adviser now finds PI cover exorbitantly expensive or even unavailable.
The view that PI may be used by regulators as a mechanism for consolidation is interesting one but who says that consolidated IFAs would find cover easier to obtain? The opposite is more likely.
Over the last five years, there has been an almost unnoticed consolidation going on at local levels, with one-man bands assembling under one roof to share costs and administration. However, this hardly amounts to the sort of big-time consolidation that I and others have been researching for many months.
We have seen the implosion of the savings market, combined with the gradual diminution in commission levels allied to increased costs. Yet IFAs have always been able to change their low-cost businesses to address these sorts of issues.
There may be a group of advisers whose turnover is too small to cover their costs and a number of first-generation networks are rethinking the way in which they service these advisers.
Part-time advisers are definitely on the way out, along with those in areas of low income. For most IFAs, the basic business model still stacks up, even if the principal has to work harder than before.
The real question is whether smaller IFAs would be better off joining a consolidator. Viscerally, the attractions of joining a consolidator seem good. A higher capital basis, combined with significant economies of scale and better technology, would all appear to lead to better business. However, perhaps the biggest attraction for IFAs would be a clear exit strategy, with a proper capital value for the business.
The problems lie with the consolidator, which would have to ingest the expectations, attitudes and small business ethos of its component small IFAs and create a business that would attract City investors while remaining attractive to the assembled advisers.
Small IFAs may be short on capital but are not short on self-confidence. They are independent because they have rejected the big-business experience and did not want to be team players.
Hurding cats is one expression but hurding peacocks is more accurate.
If you add in the idea of creating an overarching brand, you would aid sales as well as improve the company's City image and value. But brand equals consistent standards and a consistent approach to clients. How many IFA principals would be willing to sublimate their self-image for the company's benefit?
On paper, consolidation may be the answer but it only delivers the answer to other people's problems. For the IFA, the answer is to work smarter and work harder. Nothing changes.
Garry Heath is chairman of the Special Risks Bureau