Some 80 per cent of intermediaries believe that some advisers will struggle to fully complete the transition from commission to fee-based remuneration before the Financial Conduct Authority’s ‘sunset clause’ deadline in April 2016, according to new research by Investec.
The survey conducted amongst 103 intermediaries in August found that key reasons for the delay included failing to change their business model - cited by 59 per cent of respondents - and fear of losing clients and revenue - 58 per cent of respondents.
Nearly half cited administrative inefficiency and a third believed that some advisers are waiting for providers to stop trail commission altogether before making the transition, Investec found.
Advisers also did not appreciate that from 31 December this year trail cannot be taken automatically on top-ups to existing arrangements. However, 61 per cent of intermediaries’ commission-based revenues has already shifted to fee-based.
Despite this, just 15 per cent of advisers have so far moved just one quarter of their commission revenues to fee-based and 28 per cent have half or more to transfer.
Mark Stevens, head of intermediary services at Investec, said: “This study shows there is widespread doubt in the adviser community that all IFAs will be able to make the transition to a fee-based model before the sunset clause takes effect.
“For those firms that have yet to change their business model the challenge becomes more formidable.
“Faced with the changes required by the RDR, advisers have increasingly outsourced client portfolios to a discretionary fund manager. In doing so they have been able to access an investment professional, delegate the day-to-day investment management process and reduce administration.
Mr Stevens added: “We have seen a sustained increase in both the quality and quantity of our DFM partnerships and believe this trend will continue, driven by the demand from firms that still face having to make fundamental changes to their business models.”
ruth.gillbe@ft.com
