Most small IFAs will not exist in 10 years time, according to Mattioli Woods chief executive Ian Mattioli.
Mattioli, who heads the wealth manager and Sipp and SSAS administrator, says as clients become much more aware of the total cost they are paying due to the RDR they will become unwilling to continue paying charges at their current levels.
In an interview with in week’s Money Marketing, he says: “I do not think small IFAs will survive because clients will not be able to pay, or will not want to pay, the 3 or 4 per cent [total costs] they are currently paying.”
Mattioli says smaller firms will be particularly affected because of the costs of the large number of external services they use.
He says: “Many IFAs give away a lot of their total expense ratios. They will have a platform cost, they will have Sipp or SSAS costs, they will have fund management costs, they may even have administration costs, and on top of that they have their own costs.
“If you take all that together, that is where you are going to get these massive costs.”
Mattioli says a “fair” total cost of investing is between 1 and 1.5 per cent.
He predicts this cost pressure will affect adviser firms with up to 15 advisers and these firms will either drift out of the business or end up as part of larger businesses over the next five to 10 years.
Mattioli also says smaller firms will struggle to remain independent as they do not have the expertise needed to remain whole of market for all business areas.
Norwest Consultants principal Harry Katz says: “We have heard this many times before. Many people in my position have been in business just as long, if not longer, than these large firms.”
See page 37 for our profile interview with Ian Mattioli