Advisers who think their firms may go under following the implementation of the RDR should consider selling now while their firms are good value, according to Clerical Medical head of intermediary strategic planning David Shelton.
He warns advisers not to bury their heads in the sand when it comes to the impact of the RDR and says up to 30% of firms will have to think carefully about selling their businesses or making drastic changes.
“It is human nature to think the implementation of the RDR is five years away and things could change when the final rules come out. However, although there is a lot of detail to come, the direction of travel is pretty clear,” he says.
“There are around 30-40% of adviser firms who are not at professional status or at a stage when they can get there soon. They offer effective straight forward advice which is right for the middle of the market. The challenge for these firms is looking at the distance between where they are and where they want to get to in terms of qualifications.
“They could be running well, doing a good job and are good value now but as the RDR really begins to bite in terms of regulations, qualifications and capital adequacy, their value will decline.”
On the subject of qualifications, Shelton says advisers should at least be looking at current exam frameworks run by organizations such as the CII and assessing which qualifications they still need to gain. This will give them the chance to earn more qualifications in the 3-5 years before the requirements are implemented.
He says more firms could be tempted to join a network because of capital adequacy concerns but warns networks will still have to pass on increased capital requirements costs to their members. Advisers should only be joining a network for positive reasons if it could help grow their business not just for capital adequacy purposes, he adds.
Have Your Say
It is all very well for Clerical Medical's Head of Strategic Planning (a rather ironic title in view of his advice) to recommend that IFA's should consider selling their firms (to a life insurer I presume?) ahead of RDR. However, has he considered the dilemma that this poses for IFAs who are still in the prime of their working careers, or who have no wish to walk away from their clients? Furthermore, what about the senior staff in these firms who do not hold an equity share?
For all the fears raised by RDR, there is the real opportunity to create a true financial planning profession and all firms and advisers can participate in this. Over the last few years, Mazars Financial Planning has anticipated the writing on the wall and has made several radical changes to our business model, including; a move away from commission to a true pure fees model, the development of leveraged planner and financial assistant (paraplanner) teams across all our regional offices, the creation of an integral, fully independent platform proposition, development of in-house investment research and management resources and the coaching/training of all our staff towards certified and chartered status.
We have also started to grow our own planners, by recruiting graduate trainees on formal, long term training contracts, in just the same way that Mazars develops its trainee accountants.
However, we are mindful of the wealth of experienced financial advisers who may be looking for safe havens for themselves and their clients and we would be delighted to talk to anyone who is keen to progress their careers within a professional, fee-based environment.
So rather than throwing in the towel, firms should be encouraged to seize the opportunity.
Paul Willans is Chief Executive at Mazars Financial Planning Ltd
David Shelton may well have a point but it is indeed ironic it is stated from a man representing a life company that is so wedded to commission payments it makes a positive virtue out of it!
Geoff Pollock is a Partner at R T Financial Planners LLP
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