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The North/South divide

Stakeholder has been hanging like a cloud over IFAs, with reactions ranging from apocalyptic predictions of the demise of IFAs to casual nonchalance and the belief that little will change.

While pundits have had their say, George Street Research has carried out a survey among IFAs on what impact they think stakeholder will have on their business.

The research divides responses according to firm size and geographical location. About 202 independent advisers were surveyed from March 12-16, with the questions set by Money Marketing.

Overall, the findings show a divergence between the way national IFAs and smaller or networked firms see the shape of future business. Also, according to the sample, the shape of IFA business in Scotland is markedly different.

The first question was how well IFAs felt Chancellor Gordon Brown has done in promoting savings and investment. Just under a third felt that Brown had done a good job, with 66 per cent dissatisfied with his performance.

There was slight regional variation in the poll, with London, the North-east and Scotland showing a slightly higher approval rating for Brown. Strongest disapproval came from the North-west, with 93 per cent saying they felt the Chancellor had done a poor job in encouraging savings and investment.

IFAs were questioned one week after the Budget, so the findings should be seen as a snapshot opinion.

On the extent to which IFAs were making an effort to sell stakeholder, there is a clear difference between national firms and the rest. Fifty-seven per cent of national firms said they were making a positive effort to sell stakeholder compared with only 34 per cent of regional firms and 45 per cent of small IFAs.

Across all regions and categories, the number of IFAs making no effort to sell stakeholder hovered fairly consistently at around 10 per cent. However, in Scotland, 25 per cent of IFAs have turned their back on stakeholder.

Stakeholder has been targeted at moderate earners but IFAs in London and the South-east, the richest regions, show the greatest enthusiasm for selling the product. Only one in 10 will not sell stakeholder.

The effort made to sell stakeholder reflects IFAs&#39 perceptions on the future significance of pensions as a proportion of business. Here again, a striking difference emerges between nationals and the rest. Taken as an average, 36 per cent of IFAs think the amount of pensions they sell will increase. When it comes to the nationals, however, this figure rises to 62 per cent.

Regionally, those most bullish about pension business were in the Midlands, North-east and Scotland. Most pessimistic were IFAs in London and the South-west. However, just over a third felt the amount of pensions they would be selling would not change.

IFAs who expected to sell fewer pensions made up one-quarter of the sample. When asked what provisions they have made to ensure the continued success of their business, investment was the most popular alternative. It was specified by 35 per cent, rising to 67 per cent in the South-east. IFAs in the North-west showed little enthusiasm for this option and no IFAs in Scotland saw this as an option.

Expansion into the protection market was the second most popular option with 24 per cent. It was most strongly favoured by IFAs in the Midlands and the North-east.

Concentrating on selling more mortgages was envisaged by only 8 per cent. Targeting business more at high-net-worth clients also drew a surprisingly low 8 per cent.

As stakeholder was engineered without factoring in the cost of advice, many in the industry predicted that IFAs would have to rely more on fee-based business.

At present, just a quarter of all IFAs do no fee-based work. Regionally, it is clear that IFAs in London and the South-east have the stronger emphasis on fee-based work.

The findings show that for well over half of IFAs, fee-based work accounts for 5 per cent or less of their business. Only 4 per cent say fee-based work accounts for more than half their business.

However, a clear majority of IFA firms – 65 per cent – predict they will be doing more fee-based work because of stakeholder and hardly any think they will be doing less. This feeling is spread equally over all regions and IFA types.

Current areas of specialisation also show regional variations. For the purposes of the survey, specialisation is defined as an area accounting for at least 25 per cent of an adviser&#39s business.

Investment came top, with two-thirds of those questioned specialising in this market. Again, the proportion of Scottish firms specialising in investment was lower than the national average. Protection and pensions also accounted for less business in Scotland. However, IFAs North of the border sold a greater proportion of mortgages.

Pensions were the second-highest area of specialisation, with London and the South-east IFAs making up the highest figure. In third place was protection with 43 per cent.

Only a quarter of the sample specialised in selling mortgages, a market almost totally neglected by national FAs.

Given the shake-up that many predicted, the impact of stakeholder would not seem to be too great. It is, however, in the long term that any reshaping of the industry will show.

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