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National IFAs may struggle to meet capital adequacy

National IFA firms will struggle to meet the capital adequacy requirements proposed in last week’s retail distribution review, warns True Potential managing partner David Harrison.

Harrison says bigger IFA firms will find it “harder to adjust” to the new expenditure-based requirement of three months of relevant annual expenditure, which trebles the current requirement.

Harrison says: “Where the problem lies with capital adequacy is the way the rules will bring national IFAs in line with networks. That is a big leap.

“It is very difficult to look across the industry and see any big organisations, networks or big national IFAs who make any profit and if you are not making profit in the past, any impact on capital adequacy will cause big problems.

“National IFAs have got a real challenge. You only have to look at the accounts for 2008 which have been a disaster. When you look at that, you begin to wonder what purpose they will serve the adviser.”


Spread the risk

For many investors, the recent volatility in the markets has been a wake-up call. We all know that equity markets can fall as well as rise but the extended bull market that we have seen in equities since 2001-02 has lulled many investors into a false sense of security.

Linda Will

Every Monday, Stroud & Swindon sales and marketing director Linda Will gets up at 5am, drives 200 miles from her Yorkshire home to Stroud in Gloucestershire and stays there for three nights before making the commute back on Thursday night and working from home on Friday. “You have to have some commitment to the role to do that commute every week,” she says.


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