IFA: Smaller firms will be forced to join networks post-RDR
High fees and lack of regular income will force one-man bands to join network or national firms like SJP.
Smaller adviser firms and especially one-man bands will be forced to join networks or larger national groups such as St James’s Place in order to survive in a post-Retail Distribution Review world typified by rising regulatory fees and declining recurring income, according to one IFA.
In an interview with FTAdviser to be published later today, (21 December), Colin Last, managing director and independent financial adviser at Tamar IFA, said the Retail Distribution Review could raise a barrier to entry for new advisers because of the changes to revenue streams.
He said: “Running an IFA business is like trying to climb a greasy pole, because the fees are becoming just disproportionate.
“A lot of one man bands may not be able to survive on their own so may need to join networks or larger firms like Saint James’s Place.”
However, in a previous RDR interview, Mark Sikora, partner and IFA at GMP, said that one indirect outcome of the regulatory overhaul could be better pathways into the industry for new entrants.
With less of an emphasis on product sales, graduates equipped with knowledge will be able to skip the traditional first step of selling products for a big company, he said.
Mr Last does not agree, adding that a drop-off in adviser numbers resulting from the RDR will not be made up for by new advisers entering the market because they will not have the income to maintain a business early on.
Mr Last added: “There’s going to be a drop off for those in terms of new business, because it’s a complete change in the way we work. Those without experience of advice will think our fees are very high, even though they are no more than they ever were and when they shop around they will realise that’s what all IFAs are charging.”
Indeed Adrian Murphy, managing director at Murphy Financial, agrees, having previously told FTAdviser that the move to adviser fees will be the main driver for advisers leaving the market as they will struggle with cashflow as they move their businesses away from trail in the coming years.