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The verdict: Can advisers be independent and remain profitable?

adviser-clients

Three quarters of advisers say it is possible to provide an independent advice service and be profitable, according to a Money Marketing poll.

The survey of 256 advisers found 72 per cent backed the sustainability of IFAs despite recent deals that have seen large independent firms become restricted.

However, a quarter (28 per cent) said the independent business model is under threat and will not remain profitable.

In the past few weeks Standard Life-owned restricted consolidator 1825 has snapped up London-based Baigrie Davies, Norwich adviser Almary Green and Scottish firm Munro Partnership.

Almary Green managing director Carl Lamb says it is 10 per cent cheaper to run a restricted advice firm, though others dispute this.

And earlier this week Money Marketing revealed internal EY analysis predicting restricted advice will account for half the market by 2020/21.

The firm, which advises firms on potential deals, forecast adviser numbers would fall from 33,000 to 20,000 by 2013. The company reiterated its gloomy forecast in 2013, the year the RDR was rolled out. Based on the latest available FCA data, the total number of advisers currently stands at 22,557.

It also predicts among smaller firms there will be 300 to 400 consolidations a year for the next five years.

Among larger firms where most M&A activity is concentrated, EY predicts 75 per cent will be acquired over the same period.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Scott Gallacher 15th April 2016 at 12:02 pm

    I’d like to see evidence of a PI cost difference.

    Arguably the largest Restricted Advisers of the last decade were the banks which I suspect have experienced a much high level of PI claims than their IFA peers.

    Independence isn’t just about products, it’s about a culture that independence matters and puts the client at the front of all we do. Consequently whilst being independent might allow access to riskier products, overall I suspect that the PI risk from an IFA firm is not significantly different to that of a Restricted firm.

  2. I’ll bet that the 28% who said it isn’t profitable have already sold out and have become restricted. (The fox without the tail fable?)

  3. Restricted or independent doesn’t matter to clients who do not always seek out one or the other. Look after them and …

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