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FSA: less than one in 10 IFAs to take restricted route

by Michelle Abrego on Nov 20, 2012 at 16:59

FSA: less than one in 10 IFAs to take restricted route

Less than one in 10 IFAs are likely to stop offering independent advice once the retail distribution review (RDR) comes into effect on 31 December, according to the Financial Services Authority (FSA).

According to a survey conducted by the regulator of 1,436 advisers, only 8% of advisers who are currently independent are likely to switch to restricted advice post-RDR. The regulator said it also showed 86% of advisers were qualified to level four or above, with around 10% already having sat the exams and waiting for their results, and that 94% of advisers were expected to attain their qualifications in time for the 31 December deadline.

Post-RDR, 89% of advisers are likely to remain as advisers, 1% will retire as planned, 5% will leave the advice profession as a result of RDR and 2% do not know what they will do, according to the survey.

The advisers who responded span banks, building societies, independent and tied intermediary firms, insurers, wealth managers and employee benefit consultants. The interviews were conducted between 17 August and 3 October and a full report will be published in January 2013.

The research follows recent survey findings by the Personal Finance Society that claimed 63% of advisers planned to remain independent, 14% would be restricted and 9% had not made up their minds.

14 comments so far. Why not have your say?

Impartial observation via mobile

Nov 21, 2012 at 08:30

I'm sure that the survey was conducted without knowing the true definition. Unless you are able to advise on SIPP, SSAS, EIS,VCT, pension transfer , etc you are by definition offering "restricted" advice.It would be very interesting to see the results,if the survey was conducted knowing this information. Oh and that the respondents know exactly the work that needs to be done, to retain the "independent" status.

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Nov 21, 2012 at 09:07

Agree with 'Impartial Advice'. Many IFA's have not considered the true meaning of independent status post RDR and the costs involved. There is no shame in restricting your advice by product, provider or areas of expertise if you are clear with the customer the type of service they are receiving. Surely this is how some IFA's operate today although they are under the 'independent' banner .They just need to be clear and honest about the type of service being offered. Not much to ask?

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Morley Boy

Nov 21, 2012 at 10:11

Realistically RDR is not the reason many will leave the industry over the coming year/s.

The industry is effectively dying on its feet, strangled by masses of red tape.

All I want to do is offer people advice and help them, I'm not bothered by product sales. This should be simple, cheap and above all help everyone.

I've spent ages and nearly attained chartership status but as a business owner, profit in the industry is going to be ever more squeezed, even with the very best in technology. Qualifications or not, we are supposed to know how to make money.

For me this industry is not one to make money in.

I wish everyone all the best, but deep down....... we all know its true.

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Jonathan Kirby

Nov 21, 2012 at 11:00

This just looks like spin from the DeaFSA to justify the unjustifiable.

I would be very interested to see what the actual figures are for the number of CF30 IFAs prior to the RDR announcement, what they are now and again come January as I am sure I read earlier in the year that the numbers were already 10% down.

I know of many who have already left in recent weeks/months and more will surely follow.

As to the restricted/independent I would imagine a great many are like us. We will see if we can maintain the independent tag without having to jump through too many more hoops, but if not will move to restricted but impartial advice.

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Matthew Timmins

Nov 21, 2012 at 11:36

@ impartial observation

The reason so many advisers, through the survey, expect to offer Independent advice post RDR is that they now know that much of the previous speculation, regarding the need to consider every product for every client is utter rubbish.

You do not need to advise on the products you mentioned to be Independent (SiPP, SASS, EIS and VCT’s). You need to be able to demonstrate continued understanding of these type of products and when the need might arise for clients to be advised on them. You can then refer this away if you choose to.

You can also use a firms advice standards to remove the need to advise on VCT’s and EIS’s etc. For most other products, advisers can use panels and research systems to reduce time and improve the quality of advice

The FSA are not trying to move the market to restricted advice! They are trying to improve the knowledge of other product structures and the ability to understand when these might be applicable for clients.

The last thing we need is for firms to provide advice on esoteric and complex products in the belief that they need to do this to be Independent.

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Chris Geeson

Nov 21, 2012 at 11:41

Turning into a cull at least the Badgers have lots of people on their side and most IFA's I know aren't carrying any contagious deseases (ish).

10% become restricted apparently 20% plus not qualified yet with a further expectation of as many as another 20% could leave in the first 12 months of RDR because they can no longer make a living.

Then the public dont want to or wont want to pay fees because they thought what we did was always for free.

Plus higher costs, less margins, fewer clients, lots more legislation, increased reporting, many fewer IFA's to get the losses back from and so on and so on.

This will go down as the biggest "how to kill an industry" experiment in history oh and lastly hands up all those who are worried about what is happening, thats the vast majority then.

Like I said at the start at least some people care about the Badgers

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Sam Caunt

Nov 21, 2012 at 11:57

@Matthew Timmins

Spot on. It also allows you to remain independent even if your PII prevents you from advising on certain products because if you recognise that the client requires some esoteric product then you refer him to someone who can.

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Nov 21, 2012 at 12:01

@ Matthew Timmins

You are correct in most of your statement but not in respect of being able to refer business away. In order to be independent the firm must be able and willing to provide advice on all retail investment products. If it cannot or will not then it is restricted.

If that were not the case then all firms, including those currently tied, could comfortably claim to be independent, clearly not correct.

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Nov 21, 2012 at 12:01

@ Matthew Timmins

I'm with you on this. There's a lot of misunderstanding 'out there'. We've never 'had' to recommend VCT's or EIS or anything else to clients only ever demonstrate that we have the knowledge/skill sets to deal with these areas if the need arose.

The restricted model is one where a company says 'we're not even going to train our staff on VCT's for example'. It's effectively a 'restricted knowledge/skill set' model that is coming in to force from January.

The separate issue around commission vs fees is likely to have more impact on the industry than anything else.

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Ian Lees

Nov 21, 2012 at 13:29

A survey of 1436 . . .is not what one might expect to be . . .in any way conclusive, or a viable proportion. did they aske the question . . .are you leaving the industry ? Why would anyone remain in the industry given the volume of administration - when an adviser needs to spend 60/70 % of their time in fornt of clients. Of course the FCA exercise - probably did not include any consultants, or appointed representatives . . . How many people in slaes will lose theri jobs ? How many people in administration will lose their jobs ( Stabdandard Life has just destroyed 139 jobs for people in work ). With suffolk life purchasing Pointing York - there is less competition. My MP Ann Main confirmed the governemtns reasoning behind the proposals - is to increase the level of knowledge for advisers - she faield to alert people to the drop in competition, the merging of practices - the utter destruction of the service of advice. Advise will be by the few for the few - courtesy of Ann Main and her colleagues. When her voters get dumped and we tell them why . . . . it will be interesting to see the outcome. She could always drp into the jungle with her colleague . . .and snore away to theri hearts content . . .but not to the contentment of the others in the jungle.

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Nov 21, 2012 at 14:24

@ Shimples

I think the nuance that you refer to here is the crux of the matter.

Simply going through the motions of Independence but actually being, to all intents and purposes, Restricted seems to be the preferred route at the moment of those in the (seemingly) large, self-flagellatory majority at the moment.

Of course, as you say, if that's all there is to it we can all be Independent in the Brave New World.

Somehow, I don't think it will be that shimples.......

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Glint Thrust via mobile

Nov 22, 2012 at 08:20


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Dave Knight

Nov 22, 2012 at 14:26

Somewhat at odds with the data published in Financial Adviser received this morning. According to their front page the CII has issued 16,498 SPS'a, with the CIS&I chipping in another 5,240. The PFS says 89% of it's members are now "RDR Ready", but neither the number nor the SPS's issued are quoted. So that's around 22,000 SPS's issued from a adviser number of around 37,000. FA reckon around 25% are "walking the tightrope" with little over a month to go.

If you take the numbers above it makes around 60% already sorted plus whatever 90% of the PFS membership is.

Putting those numbers together, from whichever viewpoint you look at it, my guess is that we'll be looking at an exodus of around 15-20%, or between 5,500 and 7,500 advisers all looking for new jobs.

Great result eh, FSA?

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Ian Lees

Nov 22, 2012 at 14:41

The FSA only took their figures from some 1500 who we have no idea of the quality or breakdown of those chosen - or if it was a proper random number. Perhaps we should follow Standard Life - who remove 139 people and take up a 29% stake in an indian company ( reported in the FT today ). Perhaps they are naking preparation for SNP obtaining " Separation " from the UK - and going to extricate themselves from Edinburgh - for Delhi orrrr calcutta ( or Leith as they call it up there ? ) . With all the call centres would it be called Call Cutter ?

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