An adviser firm has urged advisers to be as proactive as providers in contacting their clients in the wake of trail commission being switched off, warning that there is a worry advisers may cede business if they do not act.
All trail commission will be switched off for platform business and corporate pensions from April 2016, but various providers have already changed policies.
Sheriar Bradbury, founder and managing director at Bradbury Hamilton, urged advisers to move to customer-agreed fee arrangement to stay viable.
He told FTAdviser that he was not surprised at figures this week showing 44.8 per cent of advisory firm owners surveyed by Harrison Spence could be selling their business within the next five years as valuations rise, but was “astonished” by the indifference to trail ending.
Around 48 per cent responded that good business practice such as strategy, planning and cost control are likely to have a bigger impact on the value of their business than simple supply and demand (20 per cent) or external factors such as the cessation of trail (17.5 per cent).
“Product providers are now contacting clients asking whether their advisers have been in contact recently and may be trying to muscle in, asking them to go direct. Providers are far better able to defend their business, as there is a trend for them to service people direct and take sales off the page.
“IFAs must speak to and properly service their clients, not just rely on these passive income streams. Moving to clean share classes will mean a big switch-off in trail commission next year, and I’m surprised so little is being done about it.”
Mr Bradbury admitted that around 15 per cent of Bradbury Hamilton’s income was from trail commission, but was making significant moves to switch over to customer agreed going into next year.
He also noted that while those that can adapt are doing well in the increasingly professional post-Retail Distribution Review world, but there was still a long way to go with some firms.
This week the Association of Professional Advisers warned that more needs to be done to recruit young new talent into financial advice, as with experienced advisers retiring, costs may rise without further efforts to ensure new advisers are prepared to take up the slack.
“In terms of demographics, at some smaller firms no-one wants to train up new people if they’re just going to move on, and that’s particularly dangerous for those businesses where most of the clients are brought in through one principal.”
peter.walker@ft.com
