The advice sector is, once again, in a state of flux.
The RDR, still a work in progress but nevertheless an unambiguous signal of the regulator's directional intent, envisages a radical restructuring of the provision of advice to UK consumers, and as such has major ramifications for advisers and distribution companies.
For Openwork, regulatory change presents a fantastic opportunity. Some advisers may remain as they are under the RDR, but many will not; and both camps will require significant compliance and administrative support going forward. Our aim is to ensure Openwork is in a position to provide it, and in all areas, by segmenting its business model to facilitate different types of service.
The framework of Openwork's new model is currently under discussion and we will be seeking to consult extensively with advisers to determine how best to tackle regulation and the business' evolution under it. A key consultation point will be whether we should broaden the model to enable us to provide services to directly authorised IFAs, which is an area in which I believe we could add real value.
Undoubtedly, to be successful in the DA space we would require specific competencies and capabilities - particularly to enable us to provide best-of-breed services - and we would need to look at how best this could be achieved. Acquisition would the obvious route, of course, but, should this approach be agreed, there would be no open chequebook; price - as well as strategic fit - would play a significant role in determining the extent and form of our activity.
Strategy aside, it is clear that Openwork needs to transform in the coming years to ensure it prospers in a tough, and changing, environment. We are far from unique in this respect and Openwork is fortunate that it does not, in contrast to many distribution firms, lack the capital to achieve the scale required to thrive in a post-RDR world. Certainly, the general lack of capitalisation in the sector favours the companies most able, from a financial standpoint, to execute their ‘Plan A'.
What is Openwork's ‘Plan A'? In short, we are aiming to create capital value by ensuring that Openwork is a profitable business, with a critical mass of advisers generating high quality recurring income.
This will require scale and leverage, and in practice means we will seek to provide more, and enhanced, services to greater numbers of advisers. Scale will be a vital component of Openwork's success in the coming years - as it will be for most distributors - and I'm sure adviser numbers will be increasingly scrutinised by sector commentators, both in terms of networks and the industry in general. But I doubt that predictions of a mass exodus of advisers from the industry post-2012 will prove to be correct.
Resilience is not a trait lacking in the adviser community and it is therefore difficult to believe huge swathes will suddenly exit the industry as a consequence of the RDR.
Yes, there will be much movement between networks, and consolidation is bound to continue; but I believe most advisers are, in essence, simply seeking a home to service their clients in a compliant and profitable manner. The challenge facing distribution companies is to ensure the home they offer is sufficiently appealing to attract and retain the number and quality of advisers required to flourish in the new regulatory world. I believe Openwork is in a strong position to do exactly that.
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