This year is likely to see a general election and most people and most people believe a Labour victory is a foregone conclusion.
While the election result might not change things dramatically for IFAs, the probable end of polarisation and the introduction of stakeholder pensions certainly will.
Sofa vice-chairman Gary Jefferies says while IFAs will see significant chan ges, it is difficult to envisage how those changes will interact.
The introduction of stakeholder has not been widely publicised to consumers.
IFA Promotion believes stakeholder is both an opportunity and a threat. On the one hand, it presents IFAs with a chance to establish enduring ties with the many people who will be for ced to obtain financial advice. On the other hand, as the cost of advice is not built in, stakeholder will also see IFAs inc reas ingly forced to consider charging their clients fees.
The danger is that this could herald a repositioning of IFAs, with many moving up market and into niches to protect themselves from the possible effects the change could cause. RAM Financial Services consultant Arthur Mather says: “At 1 per cent, we might be running at a loss. Inevitably more fee work will be done.”
He is concerned about the long-term impact of the greater reliance on fee-based work. “Those peoplewho can afford to go to an IFA will do so and those who cannot afford it will not. We might even end up doing some pro bono work as a result.”
Research by IFAP shows only 5 per cent of the public want to see an IFA who charges fees.
Redwood Financial Ser vices adviser Dhanji Varasani predicts the percentage of fee-based business in his firm will rise from the present 25 per cent to over 40 per cent.
Alongside the transition to fee-based work, Sofa anticipates the market will see inc reasing specialisation. Jeff eries says: “IFAs will not be able to afford to be all things to all men.”
He goes so far as to predict that the introduction of fee-based work will lead to “opt ions being crystallised”, with many IFAs deciding that now is the time to withdraw from the market.
RGT Financial Services consult-ant Mike Stringer says: “A lot of people will not be able to afford an IFA or will think that they cannot afford one. We might no longer end up dealing with the man in the street.”
Many fear it is people on low to middle incomes – the target market for stakeholder – who will not be able to afford advice.
But some IFAs are welcoming the introduction of stakehol der. “They will keep the cost down and encourage people to think about pensions,” says KC & Asso ciates adviser Kim Tan.
The changes of polarisation will see the introduction of multi-ties.JR Associates' Jerry Reilly says: “Multi-ties will be taking a lot of low-quality business.”
Stringer also believes multi-tied adv isers will mop up clients who cannot afford to consult an IFA. He suggests IFAs could meet the challenge by discounting and waiving commission.
Some IFAs view the changes to polarisation as a spur to offering bet ter value for money and questioning exac tly how independent the firm is.
Philip M Derby shire & Co managing director Philip Derbyshire takes a relaxed view of the proposed changes. He says: “I am only a one-man band and most of my business is derived from personal recommendations, so I do not think that the end of polarisation will affect me.”
But other IFAs are concerned that prospective cli ents will not understand the difference between multi-ties and IFAs. IFAP fears a blurring of the boun daries, a view shared by Douglas & Price Associates partner Rob erta Hunter Goodhall. She says: “I am not happy about depolarisation at all. It is muddying the waters and will confuse cli ents. It is mainly in the interests of the banks.”
But DBS network spokesman Sue Lewis points out that consumers have consistently “voted with their feet” for independent advice and bel ieves multi-ties are not a threat.
Aifa director general Paul Smee stresses that the economic viability and impact of multi-ties are as yet unknown.
In the coming year, there is also the confidence factor to consider in the light of the Equitable Life debacle. One IFA mentions a client who asked: “Surely you could see it coming?” The fact that MPs' own pen sions are caught up in the debacle might concentrate minds. Undoubtedly, the way in which the FSA shapes up as a regulator will affect IFA business.
Compliance, compliance, compliance is the weary man tra of both Geoff Downing Financial Services principal Geoff Downing and Jam ieson Financial Management proprietor Bruce Jamieson, who both see their businesses burde ned with excessive red tape.
Jamieson points out that a reason-why letter is now routinely four to six pages long but he believes IFAs have to go into this time-consuming detail for their own protection rather than for the benefit of the client.
Most IFAs are relatively unconcerned by the possibility of a major economic downturn although some, like Rob Cawley, whose business is investment-based, say nothing less than a sharp upturn will keep their clients happy.
The major challenge, says Smee, is for IFAs to market themselves as genuinely different.