David Ingram, partner at support services provider threesixty, has criticised the FSA's 'gold-plating' of capital adequacy requirements for adviser businesses which he believes could impact on the competitiveness of UK firms.
Under plans confirmed by the FSA recently, Personal Investment Firms (PIFs) must now have the equivalent of three months annual expenditure in capital reserves, with the minimum requirement for all firms jumping from £10,000 to £20,000.
A review of the rules found investment advisers and networks will need to raise an additional £600m to £850m capital by 2013, with six to seven individual businesses requiring over £20m.
Ingram says the requirements will have a big impact on adviser firms and limit their ability to expand.
"The money can't be used for any kind of growth such as IT spending, acquiring other practices and getting extra clients, " he warns.
He also says the new requirements will force firms to make often quite drastic staffing decisions.
" I think IFAs will be sitting down today and working out how to cut the fixed costs in their business.
"Staff will be employed on a different basis so capital adequacy requirements will be less. A lot will switch sales to a self-employed sales force as then they are getting business in but it will not be counted as a fixed cost."
Ingram says as well as supporting IFAs on issues such as capital adequacy and proposals outlined in the RDR, threesixty is playing an important role helping advisers to get the information they urgently require from providers.
He believes only 50% of providers have come clean and answered questions such as 'how will I get my money' and 'when will income recommence' since the collapse of Lehman brothers.
He praised Aegon and Skandia in particular for their openness with clients but said threesixty had been forced to intervene to get information advisers desperately needed from other providers.
"IFAs are finding it difficult with clients to keep then informed. We are stepping in to fill this vacuum with services such as threesixty TV which provides interviews with fund managers giving economic commentary."
Ingram's complaints about provider communication come as a recent Professional Adviser survey found advisers felt let down by the low level of support from a number of fund management houses during the current economic turmoil.
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