The UK is set for an explosion in the number of advisers who offer DIY or execution-only services to clients in the next two years, as firms fight to remain profitable after the RDR.

Currently just 1,950 advisers offer clients the ability to execute their own transactions via a platform, but that number is set to almost triple to roughly 5,375 by 2014, according to a CoreData Research report seen exclusively by Investment Adviser.

The report’s findings come in spite of the fact that in May the FSA issued a warning on the trend, with the regulator’s technical specialist Rory Percival questioning whether firms that offer the services have the correct disclosure regimes in place.

The growth also comes after the Financial Services Consumer Panel said in a recent paper on the RDR that it was “concerned that consumers may increasingly be offered ‘execution-only services’.”

“While for many this will be absolutely right, for some it could lead to poor choices and poor outcomes,” the body said.

Of those advisers planning to introduce execution-only services, 45 percent are yet to determine how they will charge clients for it, the research reveals.

Craig Phillips, UK principal at CoreData Research, said that “momentum is growing for an explicit charge to be enforced”.

“Against a backdrop of new regulatory change and compounded by the challenge of would-be client reluctance in paying a true price for advice post-RDR, it all adds up to advisers seeking new income streams,” he said.

“Adding an execution-only service is not just about new sources of revenue, though. For 55 percent of advisers planning to add these services their intention is to do so as a value-add for existing clients.”

Advisers are fighting to find new ways of generating revenue ahead of the January 1 2013 implementation of the RDR, which will ban advisers from receiving commission on advice. The RDR also drastically increases the burden of qualifications and research involved for advisers to continue to make investment recommendations.

In July IFA Centre managing director Gill Cardy suggested advisers should consider allowing clients to implement trades themselves, reducing costs.

We say… Advisers are facing concerns that many consumers will refuse to pay fees for investment advice and opt for DIY or execution-only alternatives. To survive, some advisers may well have to offer a revamped spread of services, including a DIY element. However, recent regulatory scrutiny of the platform market could throw a spanner in the works for those hoping to compete.

Where do you stand?

As thousands of advisers look to offer clients the ability to carry out transactions without advice, we ask advisers and platform experts whether the trend is a sensible response for an industry fighting for survival in a difficult regulatory environment or whether it potentially sounds the death knell for financial advice.

Mel Kenny, director, Radcliffe & Newlands FP: “Post 2013 I can imagine there will be a separation in the market of advised and non-advised transactions, and [that] the RDR will drive this. Some of those who have little to invest and go down the DIY route may find themselves in all sorts of problems, such as buying high and selling low.”

Mark Polson, platform expert, The Lang Cat: ”The issue is clients who learn they can transact themselves may begin to be comfortable doing it without an adviser. It is also hard to strike a balance in the regulatory sense if a business is offering execution-only and advised business. Large advisers may want to think about a spin-off business.”

Frank Cochran, MD, FSC Investment Services: ”If there are going to be 5,000 IFAs offering this type of service there will only be a few thousand left doing the job properly. The better quality clients will walk away. We are fully RDR compliant and will stick to what we know best and we have all our exams and professional standings in place to keep offering advice.”


Published: 1 October 2012
By Jenny Lowe
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