Much has, rightly, been made of the potentially debilitating effect the move to make the diploma the minimum qualification standard might have on scores of otherwise healthy firms.
However, in 2009 by far the biggest body blow to come out of the implementation stage of the Retail Distribution Review will be the new capital adequacy requirements.
Not only are these new requirements half-formed but, as I understand it, they are to be pushed through at break-neck speed. This will without doubt be decisive for a great many firms.
The move to increase from £10,000 to £20,000 the basic limit will be difficult enough for firms to bear, but the additional requirement of three months ordinary expenditure, subject to the £20,000 minimum, could prove to be the killer blow for up to 25% of otherwise sound medium-sized adviser businesses.
With larger support and better systems any new model adviser firm being made to tie up such substantial levels of capital could find themselves on the ropes as a result of such a low blow. A blow landed on a profession which has gone several rounds already with the regulator - testimony to the tenacity of professional advisers, the industry has nonetheless emerged fitter and more focused as a result.
Unwittingly, however, this latest move could force firms to stop investing in those areas of their business which make them the model the regulator wants others to emulate - firms with significant budgets dedicated to training, compliance and systems - as the money will now have to be diverted to cover the new capital adequacy costs.
Now no one would argue that reform of the old capital adequacy requirements was overdue but at what cost pushing them through half-formed and at break-neck speed? The speed at which these reforms are being pushed through is sheer lunacy.
This, to my mind, is such a potentially devastating issue that it will have more impact on the market if implemented than TCF ever could, at the same time undoing a lot of the good to-date achieved through TCF.
It will force a rethink of many business models, and not for the better. Those adviser firms which are looking to make the move to a recurring income stream will be hit hardest and could discourage a move to a new, more TCF focused model. That benefits neither the firm nor the consumer.IFAonline
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