Banks set to benefit from IFA reforms

by Gill Montia

Story link: Banks set to benefit from IFA reforms

Banks could be the beneficiaries of the misfortune predicted for up to 50% of all Independent Financial Adviser (IFA) businesses in the UK.

Such businesses could be at risk of losing customers to the banks, if proposals outlined under the Financial Services Authority’s (FSA) retail distribution review are introduced.

The review involves the FSA working together with industry and consumer representatives, to determine the root causes of inefficiencies in the financial services market.

It is likely to result in changes to the FSA’s current regulatory approach and in a recent survey of over 500 IFAs, 44% said they would become General Financial Planners, if proposals to introduce a three-tiered model of retail investment distribution are implemented.

In this case, many IFAs could find themselves struggling to maintain their businesses.
The new system of regulation could mean that fee-based IFAs would attract the high net worth investors, leaving IFAs opting to become General Financial Planners in a highly competitive market.

Figures from the Association of Independent Financial Advisers estimate that the UK’s IFA sector had a turnover of £6.5 billion in 2006.