I was astonished and disappointed to read today that a small number of IFA business owners have approached the FCA and called for action from regulators and lenders to make it easier for them to remain independent against the backdrop of increasing consolidation.
Why?
They fail to understand the regulator’s role and their role in the retail financial services space.
My initial thoughts are as follows:
Regulators are civil servants. They are not quasi business consultants. IFA business owners should seek solutions to their challenges and find the competitive edge required to survive and prosper today.
These IFAs have forgotten that they are business owners in a brutal commercial world. Their job is to make profit and service clients well. Without profit, there would be no business.
The regulator wants rid of smaller IFAs either by acquisition or retirement. They do not hide the reality that they want a small vanilla IFA space with large businesses dominating the market. It’s simply more manageable and more cost-effective to manage.
Here is their manifesto with my comments in italics:
1. Action on the cost of borrowing to help advice firms meet capital adequacy requirements to help smaller firms grow through acquisitions; Seriously, this is each firm’s responsibility not the regulator. There are several quality lenders in the market, including Family Offices and other source of funds.
2. More education and awareness of advice as a profession to curb worries over staff retention and recruitment; This is the responsibility of each firm. It is also an opportunity for individual firms to stand out against the competition.
3. An Independent Academy to encourage advice as a second career to tackle the profession’s ‘recruitment gap’; Several individual firms have used their initiative and developed academies, sometimes collectively and sometimes together. Once again, it is an opportunity for differentiation. Universities are keen to work with IFA firms regarding work placement and relevant qualifications.
4. A closer look at the cost of compliance to ensure smaller firms are paying “a proportionate sum” for regulation; and
5. A “light-touch regulation” approach for those firms that cause the least harm to the financial services industry. Good compliance should be a ‘given’. It is an organisational, training and technology challenge. Economies of scale reduce costs, and it is not beyond IFAs to work together more collectively to overcome much of the above.
In conclusion
There is little doubt that the UK IFA market is amidst fierce competition and fundamental change. I understand and respect the views of those that have drafted this manifesto, but they are fundamentally flawed. The challenges are there for all IFA businesses, and each is responsible to face this challenge, not the regulator.
By Brian Spence – HSP. Consulting Founder
