Data reveal 85% of IFAs not yet RDR-ready
Study shows urgent action is needed for firms to be ready for Retail Distribution Review implementation in January.
With a little more than five months left until the implementation of the Retail Distribution Review, a new study reveals the number of adviser firms are able to meet the new requirements has risen modestly in Q2, though 85 per cent of advisers are still not ready for the new rules.
According to data collated by IFA database MyTouchstone, which gathers information from over 1,000 advisers each month, 15.3 per cent of adviser firms in Q2 are ready for the rule changes, an increase from 9.7 per cent in March
Neil Cunningham, director and general manager at Touchstone Financial Analytics, which operates the database, said that the continuing dependence on commission as a source of revenue is one of the key stumbling blocks, as many firms are delaying the introduction of adviser charging to maximise commission income post-RDR.
He said: “Other data from our RDR surveys in the first and second quarters of this year suggests that for a large proportion of IFAs, commission is still a key income generator.
“In quarter one, 2012 our analysis showed that for 79.3 per cent of IFAs, over 25 per cent of their income is still generated by commission. In quarter two this has only reduced slightly to 74.4 per cent.
“We think this continuing dependence on commission could have a lot to do with the current economic climate. It might be the case that IFAs are holding out to the last possible moment to change their business model to charge fees rather than earn from commission.”
There also seems to be a hurdle in IFAs achieving the necessary qualifications. To be classed as RDR ready, each participating firm must have at least one adviser qualified to QCF level 4.
In both quarters fewer than 60 per cent of IFA firms surveyed said that they had at least one of their advisers qualified to QCF level 4, while a little more than 30 per cent of firms surveyed said they have all their advisers qualified level four.
In quarter one 2012, 55.3 per cent of individual advisers said they are already QCF Level 4 qualified and in quarter two this had increased to 61.8 per cent.
The data conflicts sharply with that released by the Chartered Insurance Institute, which claims that 69 per cent of the 20,295 adviser members of the Personal Finance Society have already gained a level four diploma, while a further 21 per cent hold CII credits towards the qualification.
CII data does not include non-PFS members or those using an examination body other CII to get their exams.
Mr Cunningham said: “There is nothing wrong with a planned transition, making the necessary changes on or around the year-end deadline. But some firms may still have some planning to do, because actually there’s an awful lot of hard work needed in a very short space of time.”
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