By far the story that garnered the most attention this week was news that a major IFA firm with 26 advisers and more than £400m in assets could eventually abandon independence after being bought out to be the cornerstone of a new network that may go fully restricted.
Brian Raven, chief executive of Aim-listed Tavistock Investments, told FTAdviser he would prefer it if the network, which should be launched within the next three months, is restricted due to this being easier from a “compliance perspective”.
Last week Tavistock announced it had acquired County Life and Pensions, which owns Sterling McCall. It said the purchase would be the “cornerstone” on which a network of “several hundred” self-employed advisers would be built.
Mr Raven said: “I am keen to build a restricted network as compliance is a challenge and it is more straightforward. To be and remain independent is a challenge for every firm in the country.”
He added that he had heard “anecdotally” that if the catch-all alternative to the toughened independence definition did not carry the label ‘restricted’ and was instead something far more auspicious like ‘specialist’ many more would ditch their IFA status.
This is not the first time we have heard that, and it fits with a broader picture that seems to show larger more compliance-driven networks and firms such as Sesame go restricted, while smaller firms with more of an emotional attachment to the independence label are holding on.
FTAdviser data covering some 10,000 advisers revealed that 24 per cent of of advisers now describe themselves as restricted, a rise of 3 percentage points on last year.
In this context it is significant that a professional body with some 142,000 members has labelled as a ‘cause for concern’ the “direction of travel” that could see independence become a minority of the adviser sector in the years to come.
John Gaskell, manager of financial planning within the financial services faculty at the Institute for Chartered Accountants in England and Wales, said the concern stemmed from the fact that under the new rules there are “many more shades of grey under one label, restricted”.
He also railed against wording used by the regulator recently that seems to ratchet up the pressure further on IFAs by saying they cannot pool expertise and refer between their own advice staff if they wish to retain the moniker.
It is too early to predict the death of the ‘IFA’, but how gradual the trend is clear and the concerns well voiced.
The FCA has previously acknowledged there are issues with the RDR advice dichtomy, it must now act to shore up independence by alleviating some of the compliance burden, or at least tidy up the definitions to delineate what could become a very crowded and confusing restricted umbrella.
Commission is ‘bad’
Whether it was right or wrong, commission was banned following the RDR implementation, which was 18 months ago. I have to say, it feels a lot longer than 18 months, however
Another of our major stories this week saw FTAdviser sister publication Financial Adviser reported this week that a firm has pulled its advertising campaign due to the wording on its flyers. The wording “misled some advisers into thinking they could be paid commission by the back door”.