Industry experts have warned that many IFAs are still in denial about the difficult business model transition that is required under the RDR.
At a Money Marketing round table on adviser-charging last week, industry representatives expressed concerns that a large number of firms have failed to get to grips with moving to an adviser-charging model and offering a clear definition of their business model under the RDR.
Ernst & Young director of financial services Malcolm Kerr said: “Some intermediaries are still in denial. For those advisers, loss of commission is like going through a bereavement and they cannot move past the initial denial and anger stages.”
In the past, E&Y has predicted that the RDR will see the number of investment advisers in the UK drop from 30,000 to 20,000.
Kerr added: “My worry now is that in 2013 we will see an even greater drop in adviser numbers as people start trialling their new business model and start practising their pitch around charging fees. They need to begin practising now.” Institute of Financial Planning chief executive Nick Cann said: “When you talk to advisers, they are a mile away from having clarity over what their proposition will be.
“A lot of national IFA firms and networks have not communicated to their advisers the importance and the priority that needs to be given to putting a new model in place given the timetable we are now facing. There has been too much noise about qualifications.”
Syndaxi Chartered Financial Planners managing director Robert Reid said that at a recent financial planning meeting, only 25 per cent of advisers were registered for VAT and 75 per cent had never invoiced a client for payment.
He said: “The greatest concern I have is around the bulk of the new model adviser group who think they have got it all figured out because they have been doing commission offset for years. They think they are sorted but they are nowhere near.”
Personal Finance Society head of technical services Rebecca Prestage said: “A lot of advisers are not fully aware of how difficult this transition will be.”