Controversial?

Monday, 15th March 2010 10:08 - by Resident IFA

By December 31st 2012, Independent Financial Advisers (IFA) will need to make two potentially major changes/improvements to their businesses. These are: 1. To achieve a ‘Diploma’ level of professional qualification, known as QCA4 2. To move away from commission to fee-based (or at least Client-agreed-payment-from-product) remuneration I recently attended a seminar where the presenter asked who still needed to pass more exams to reach QCA4. Around 50% raised their hands. The presenter then asked those committed to reach QCA4 to keep their hands aloft. I was shocked by the minority that did so. This links nicely (or nastily) to the second point of moving to Client agreed remuneration. The IFA industry probably has an average age of 55, of which quite a few Advisers will have done quite well for themselves financially. So, understandably, they may wish to leave the industry in 2012, rather than undertake study and make drastic changes to their business models. My only worry…and I must say that I know many, many honest and ethical IFAs…is that some of those from the ‘old school’ will be taking near-maximum commissions, say 7%, from Investments and other products to maximise their earnings before they bow out. This approach will only really ‘work’ for those IFAs that intend to close their business. Any that wish to sell their business on are in for a rude awakening as business values are built around servicing payments leading to future revenue i.e. 0.5% per annum paid by Client/Provider from an Investment in order for the Adviser to review and provide ongoing advice. Let’s hope that I am totally wrong and way off-track. At least the financial advice/IFA industry will be younger, higher-qualified, and remunerated in a more transparent manner come January 1st 2013.