Compliance

One In Seven IFAs To Leave The Industry Due To RDR - JP Morgan AM Survey

Wendy Spires, Deputy Editor, 4 February 2010

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One in seven IFAs intend to leave the industry as a result of the UK regulator’s Retail Distribution Review, according to a new poll by JP Morgan Asset Management.

The RDR – a programme of reforms which are due to be implemented at the end of 2012 in a bid to drive up standards of investment advice – has raised a number of concerns among the IFA community. Many are worrying about rising business costs, more exams and an increased regulatory burden as the RDR’s proposals include advisors being required to be qualified at the equivalent of degree level and firms having to overhaul their remuneration models.

Despite the long lead time running up to the RDR, JP Morgan Asset Management’s survey would seem to suggest that, for some, the new requirements are a bridge too far: 14 per cent of those polled said they intend to exit the industry, perhaps feeling they are either not equipped or prepared to meet the RDR’s stipulations.

On a brighter note, the majority of respondents to the survey would appear to be quite sanguine about the coming reforms, as the vast majority, 84 per cent, said they intend to remain independent advisors. Just 2 per cent plan to become “tied” advisors, the survey also found.

While most plan to stay in the industry post-RDR, JP Morgan Asset Management warns that those IFAs planning to sell their businesses need to start thinking now about the best time to exit.

“It’s a tough market in which to sell your business at present, but advisors shouldn’t be fooled into thinking that valuations will go up in the next few years. In fact, in the rush to sell before 2012 the market could become flooded. According to a [2009] report by Ernst and Young, the IFA sector is predicted to contract by 25 per cent by 2013,” said Jasper Berens, head of retail distribution at JP Morgan Asset Management UK.

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