The majority of financial advisers in the UK are determined not to give up their independent status, despite many businesses feeling the pressure to advise on a restricted basis due to escalating costs.
Of the 350 independent financial advisers surveyed by consultancy firm Harrison Spence, 61 per cent are staunchly independent and are determined to remain so going forward.
Yet the firm predicted a significant rise in the number of advisers sacrificing their independence over the next 12 months.
According to the Adviser Views survey, conducted last month, one in 20 IFAs planned to adopt restricted status in the next five years.
The public's perception of restricted firms is pretty negative Wendy CochranThe firm pointed to figures which showed the increasing trend towards firms moving to restricted status, with the number of advisers stating an allegiance to independent status declining over the three years, falling from 74 per cent in 2014.
Year | 2014 | 2015 | 2016 | 2017 |
IFAs saying they would not consider restricted status | 74% | 71% | 67% | 61% |
According to Brian Spence, founding partner of Harrison Spence, this trend was largely a result of advisers deciding it was more practical and cost-effective to switch to restricted status.
“While independence is an ideology for many IFAs and very much part of their identity, our survey demonstrates an increasing willingness to consider restriction.”
The firm predicted that within the next year, one third of the market will be restricted, up from around 15 per cent today.
In the next three years, the firm expects there to be a 50/50 split as businesses move to restricted status to try to reduce costs and risks, and free up more time to spend with clients without fundamentally changing their offering.
Mr Spence pointed to the Retail Distribution Review which put fear into the market, but he said over time, IFAs have become much more confident when it comes to complying with the new regime.
“However, numbers drive businesses and there are undoubtedly additional costs associated with independence," he added.
“We predict that margin pressures will persuade increasing numbers of advisers to adopt a restricted model.”
Wendy Cochran, IFA at Dalbeath Financial Planning, said her firm is independent and intends to remain so.
"I actually feel that the quality of the advice offered by restricted and independent firms is very similar. However, the public's perception of restricted firms is pretty negative.
"Clients often ask if we are independent, and the inference is that we are therefore aiming to offer what is right for them and not to push them to a provider because we are paid to do so."
katherine.denham@ft.com
