Over the past months, the polarisation debate has dominated my discussions with IFAs, product providers and trade bodies. The proposed amendments to the polarisation regime announced by the FSA last week, along with the looming 1 per cent world, will certainly have a dramatic im pact on the business environment we work in. But will this create a competitive landscape that is any more volatile than usual? I don't think so.
IFAs have always operated in a tough, rapidly changing environment. But one thing remains constant – IFAs have not only survived but they are thriving. The number of registered individuals is still increasing and I believe is at its highest level ever.
IFAs will continue to survive and they will do so by reinventing themselves and adapting their business processes.
And the opportunities are substantial. The Cap Gemini Ernst & Young report on challenges and opportunities in the UK IFA market shows that most people still want advice and 57 per cent still want to receive this face to face. The result of this is that IFAs are continuing to be the major distribution channel within a growing market.
Many IFAs I have spoken to feel threatened by lowmargin products and the arr ival of new distribution channels. However, this kind of environment has been the norm in the US for some time now but it is still an advised market and people pay fees for good quality financial advice. Like so many other trends, I suspect this will translate into the UK.
So despite the obvious threats, I feel that there are many opportunities for IFAs on the horizon. This may require some changes to the way they work, but this is the key to survival in any industry. Businesses will always be looking for a competitive advantage and so change is inevitable.
A key issue for any financial services company at the moment is technology. Many, including me, believe that the successful companies will be those that embrace technology, using it to save time and drive costs out of their business process in order to operate in an environment of lower margins.
For IFAs prepared to take up the challenge, products such as stakeholder pensions become an opportunity. By looking for new ways of working, such as adopting streamlined technology and building affinity relationships with local businesses, IFAs can start to advise on a product that in the near future may become compulsory.
As for polarisation, CP 80 outlines the FSA's proposals for the introduction of adop ted packaged products and the abolition of the polarisation regime as we know it. My conclusions on the proposals reflect those of leading IFA trade bodies, such as Aifa, that I have spoken to over the past week.
Mainly, the growing understanding of adviser status we have built up since the Financial Services Act 12 years ago will be lost, leading to greater opportunity for mis-buying by confused consumers.
But also, enforcing the new regime may lead to compliance problems and complaints procedures will become more complicated with provider and seller potentially pointing the finger at each other.
The consultation period is clearly a distraction for IFAs. Whatever the outcome of this debate I think the opportunities for IFAs in the new environment will be as rewarding as ever. The question IFAs should be asking themselves is the same as before: How do we best take advantage of the opportunities available in the current business environment?
Jim Gaskin is corporate development director at Exchange FS