Push on and prosper

Kevin O’Donnell

Kevin O’Donnell

In my many years of covering the IFA sector the most important lesson I have learned is never to write off IFAs – RDR or not they do not give up easily.

While early indications are that quite a few IFAs have fled to the safer harbour of restricted status – temporarily or otherwise – most appear ready to plug on, perhaps opting to become fully-fledged financial planners or wealth managers but certainly all with a new outlook on the client-adviser relationship.

The old world is over and probably never to return. Providers have been barred from using the carrot of commission to help sell products and there cannot be many advisers who do not realise that professionalism and higher standards are here to stay.

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It is fair to say that the IFA sector that remains has been through the mill over the past few years and yet despite all this turmoil I remain positive about the intermediary sector – so why? Before I give my reasons it is worth looking at the numbers. Ernst & Young forecast towards last year that up to 30 per cent of advisers would call it a day with the arrival of the RDR while the FSA put the reduction as low as 5 per cent. A 15 per cent reduction was a popular guess and may be closer to the reality based on recent evidence.

The big questions are how many advisers have hung up their coats or moved into restricted or other sectors, reinventing themselves. It may take a month or two before we have accurate figures rather than predictions but the regulator still expects 30,000 advisers to be left and I am bullish that this ‘hardcore’ could eventually start to grow, now that the cloud of the RDR has finally moved on.

There are some good reasons for this. For one, the adviser sector is now inherently a much more professional one and this alone is likely at a stroke to attract more graduates and better quality individuals as recruits. In addition, the new clients prompted to use a financial adviser will likely be better off – if only to afford the fees – and will appreciate the more holistic approach to their finances which is more conversational and less ‘salesy’. Better quality advisers and better quality clients sounds like a good combination to me.

The reputation of any sector is also vitally important to encourage consumer trust and, let us be realistic, the reputation of the financial services has been routinely sullied until now. The RDR is a chance to turn over a new leaf.

That is not to say there will not be problems. IFA network Tenet revealed last week that 10 per cent of its investment advisers were de-authorised at the end of 2012. The company said that another 15 to 20 per cent of network members may have also stopped providing investment advice, either through choice or not achieving the required level four qualification.