The combined impact of the retail distribution implementation programme and current economic conditions will place a great deal of pressure on the adviser over the next couple of years. We all already know the issues – increased minimum professional standards, higher capital adequacy and a move to a defined fee and service proposition.
Sad as it will be to see, many advisers may well fail to make the grade. Various commentators have already predicted greater consolidation activity in the intermediary market-place. Others are saying that a great swathe of the adviser community will simply retire. You can see the attraction of that option for advisers close to retirement already who cannot see the value in obtaining professional qualifications or changing their business model away from sales and commission.
What this, and other factors, mean is that the bar is being raised for directly authorised firms. Many of the attractions of being a small directly authorised firm could quickly look less attractive.
Having to retain a third of your annual expenditure in readily realisable assets to satisfy prudential requirements is a big step up from the current position of keeping £10,000 in the bank. Getting every adviser to a QCA level 4 professional qualification, whatever that might turn out to be, requires a big commitment in terms of study. Switching from commissions to fees (and from sales to service) demands a huge mindset change.
What is interesting is that some advisers, typically self-employed consultants with directly authorised firms, are only just starting to smell the coffee. In the past couple of weeks, we have been approached by several who are explor- ing their options in light of the above issues. Many now realise that the future is far from bright in their current homes.
Yet we think that the future could be very bright for directly authorised firms and their consultants, assuming that they are willing to make some changes and invest in their collective futures. For all the debate around “old” and “new” model firms, there are good reasons to develop a professional practice. It results in more predictable streams of revenue, happier clients and a more compelling proposition with which to acquire new clients, of the right type.
All the energy currently consumed by practitioners and advisers who are resistant to the inevitable change which is coming could be far better spent simply making that change. Yes, it can be quite scary moving from an established (albeit now broken) business model to a new way of doing things. Yes, it can be difficult to understand the value of taking more exams unless you want to find that value but the future is about these changes.
Martin Bamford is joint managing director of Informed Choice“