In this blog I’ve talked at length about the problems that IFAs and networks are facing as a result of the huge changes that RDR has brought about. The end of trail commission and the need for a strong service proposition and uniform charging structure has presented some firms with almost insurmountable challenges.
However, this is not to suggest that there aren’t opportunities for IFA businesses in the future
as well. In fact, the changes that are shaping our emerging profession will create the chance to
prosper in the next few years. It pays to be looking ahead now at how the market will be in the next
five years in order to take advantage of the conditions that will emerge.
In five years time there will be far less competition in the market place and a sellers market will
emerge. The numbers of IFAs in the post RDR world will have dramatically reduced and so finding
clients will not be quite so challenging, many will simply come to you.
This obviously has implications for your charging - if you aren’t competing with dozens of other
IFAs, you don’t have to compete on price and instead can attract high net worth clients who are
attracted to your service proposition, not your bargain pricing.
Clients who have been abandoned by their former IFAs who have left the industry will be looking
for someone to handle their affairs and to offer quality service, and this will be an opportunity for
you to assist the client and the surpass their expectations.
It is likely as economies recover from the financial crisis that house will continue rising and this will
mean that high wealth clients will be looking to IFAs to help them protect their equity as they seek
to pass it on.
HMRC’s seven year rule sadly might not be viable for some clients who are not in the best of
health and so finding other investment opportunities will continue to be an important area of advice
Tax efficient investment vehicles such as EIS and VCT are likely to develop as areas of investment
due to changes in the amounts that can be invested in them (up to £1 million) and the length of
time that the investment has to be maintained (now just three years for EIS).
In addition to this, the new rules surrounding annuities and flexible draw down of pensions means
that older clients with lump sums derived from their years of hard work and prudence will be keen
to find ways of investing their wealth in order to protect it.
Following the end of trail, advice will become much more expensive and lower income investors
will be priced out of the market. New technology will no doubt remedy this to some extent, if face to
face advice becomes too expensive for some, then the development of Skype and other free video
conferencing tools online could create affordable alternatives.
Nearly all ‘real world’ business models have been shaped or challenged by online alternatives and
the IFA business is likely to be no different. How quickly this happens is debatable, but my instinct
here is that it will be quite slow unless a major internet giant became involved. Once a Google
Finance or an iAdvice service comes on to the market, all bets will be off and something of that
magnitude would be a major game changer for real world firms both small and large.
Another kind of consolidation is occurring throughout the industry, legislation in the legal business
(the Legal Services Act 2007) has had a similar effect on lawyers that RDR has had on IFAs. More
regulation, higher overheads, potentially lower margins and a much more uncertain future have
forced many smaller law firms to think innovatively in order to prevent going to the wall. The result
has been a much greater degree of collaboration with IFA firms and even mergers; this is a trend
that I expect will continue into the foreseeable future.
As I’ve already mentioned in this blog, I believe that Bradbury Hamilton is a perfect match for IFA
firms who are struggling at present and worried about the future, we can provide those economies
of scale that are unavailable to small firms and lone advisors.
I’m also keen to reach out to law firms who deal in trusts and wills, we have plenty of trust work
that needs to be done and finding a firm that works well in partnership with an IFA business is
essential for what we do.
If you fit either of those categories, get in touch, you can contact me directly here.