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.”