Your IndustryNov 25 2015

Restricted client offering set to rise by 2020: poll

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Restricted client offering set to rise by 2020: poll

More than 40 per cent of small advisers are expected choose a restricted offering for their clients in the next five years, analysis by consultancy Harrison Spence has claimed.

Brian Spence, managing partner for the retail financial services consultancy, said: “You become more of an adviser and give holistic planning advice when you go restricted.

“A lot of IFAs are seeing themselves as investment agnostic. They select an investment proposition that works for them, and may choose to go restricted.”

Firms that already operate a restricted or hybrid model of both independent and restricted include St James’s Place and Intrinsic.

Research done by Harrison Spence, among more than 20,000 individuals on its database, found that 26.5 per cent of IFA firms could see themselves becoming restricted in the next 12 months, with 3.5 per cent envisaging this in two years, and 10.8 per cent in five years.

The research also found that three-quarters of IFAs believe business will get better in five years’ time, with 55 per cent believing in improvement over the next year.

He said: “IFAs think things will get better. I would agree because IFAs are going to fall away and the ones that stay will be professional and will make a profit.”

Mr Spence said: “IFAs don’t make a profit, rather they are valued on multiples of recurring income. They make an income but not a profit.

“Businesses are going to be valued on profit. That’s why people are buying adviser businesses because they have scale and can increase their turnover and not increase costs.

“Business will be professionialised, and those that remain standing at the end of five years will be successful and meet challenges ahead. Business value will be small if a business can’t make it.”

Adviser view

Marvin Evans, principal at Bristol-based Old Bank Wealth Management, said: “Turmoil in any profession sorts out the wheat from the chaff. Those that remain will prosper.

“Other things are coming into the mix when it comes to advice, such as auto-enrolment and the mess the government has made with flexibilities in pensions. The inquiries we get from clients, that’s all good for us. Mr Spence is probably spot on and the next five years should be good.”