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Home > Business/Finance > Financial Services > Banking
Independent Financial Advisers
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Between 2003 and 2007 the profession of independent financial advisers (IFAs) has been targeted by a barrage of regulatory reform and industry restructuring.
Economic conditions appeared stable for the majority of the review period, but present and future conditions remain very uncertain. The credit crunch could lead to significant changes in the type of services demanded by consumers, as mortgages become more difficult to obtain and the value of equities stagnates or falls.
Regulations under the Financial Services Authority (FSA) have come to impact on all advisers, whether offering insurance, mortgages or investments. The depolarisation of financial advice in the mid-2000s led to the purchase of many agents by large institutions, as well as to the expansion of multi-tie agent networks. The number of IFAs has fallen, as the costs of complying with the new principles and taking appropriate qualifications and continuing professional development have risen. New IFAs are now being recruited and trained to a higher level than in the past.
However, regulatory reforms under the Retail Distribution Review Discussion Paper (RDR DP) propose further changes to improve the customer experience by segmenting advice according to customer levels. This Market Assessment report includes criticism of this approach. The report also considers the fortunes of IFAs working in the general insurance industry, where tied agents have a significant presence, in long-term insurance, where IFAs predominate, in mortgage advice, and in investment and savings.
The market conditions of 2008 mean that financial advice has never been more necessary, but only in the area of pension provision is there likely to be a significant increase in activity. Reforms to tax and pension law mean that innovations in persuading consumers to save are politically apposite, if possibly ineffectual, when their interest remains in their property as a hedge against inflation.
Key Note's exclusive consumer research found that, although IFAs are widely respected, only a third of respondents agreed that they would consider using their services, while a larger number said that they would consult a financial adviser linked to their bank. In addition, the research shows that a high proportion of respondents find most financial information difficult to understand.
Overall, IFAs have survived the regulatory shake-up in robust form and are likely to perform a significant role in financial services distribution over the next 5 years (2008 to 2012).
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