Any advisory business is doomed (I will ignore the obvious question that if that were true why anyone would want to buy it?) You want to sell up. You would be crazy to want to continue.
What is worse, the price for selling your business is falling by the day. The latest threat to the value of your business is April 2016, so you must sell now.
This scare tactic is bizarre.
The changes to the payment of legacy commission by platforms in April 2016 was announced many months ago so if this really was going to make such a drastic change to the value of your business then the die has already been cast.
And who purchasing a business post-RDR and post the platform legacy commission announcement would not already predict a reduction in pre-RDR trail commission and price that into the deal accordingly?
Good advisers will continue to advise their clients. Associated fund switches and product will reduce legacy commission. So unless every single one of your clients has all of their money in pensions and investment bonds and all fund switches escaped the legacy changes every firm would be feeling the effects now.
In fact the iniquitous section K of the retail mediation activities return is intended to prove beyond reasonable doubt that adviser charging is being properly implemented by demonstrating return by return a falling off in pre-RDR revenues and an increase in post-RDR adviser charging revenues. Of course the regulatory fear has been that dreading their trail revenue being cut off, advisers would either fail to review client portfolios or fail to advise their clients to revise holdings.
Some product providers have gone beyond the requirements of the rules and been considerably more draconian than the regulator required which has brought the impact of the trail revenue changes faster and harder than predicted.
Some product providers have gone beyond the requirements of the rules and been considerably more draconian than the regulator requiredAnd everyone has got excited about clean share classes now, and the widespread introduction of clean share classes as the easiest way for fund management groups to deal with, adviser charging has also accelerated the removal of trail revenues faster than anticipated.
But how could anyone have failed to predict that unless advisers created an effective mechanism for ongoing advice charges their trail revenues would fall, and company valuations with them?
Gill Cardy is network development director of ValidPath
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