Independent advisers in for a rough time: Weatherston
The Society of Independent Financial Advisers has officially ditched its lengthy name in exchange for the letter-only, regulation-friendly SIFA.
Wednesday, May 19th 2010, 7:22AM 
5 Comments
by David Chaplin
Outgoing chairman, Murray Weatherston, said the name-change was made necessary by the Code of Conduct that redefined the use of the word ‘independent' for advisers.
He says by dropping all the individual words "leaves us with a simple word SIFA, which neither means anything in itself nor is an acronym, but retains links with our rich past."
While the advisory industry was under threat from impending regulations that favour institutionally-owned businesses, SIFA would remain "a useful organisation" under the new regime.
Weatherston also warned that the independent advisory industry was in for a rough time as regulations started to bite, pricing most consumers out of the market while imposing onerous compliance costs on single operators.
"I fully expect the market share of advice provided by the manufacturer-owned distribution channels to increase markedly. That is why the institutions are such enthusiastic supporters of the regulations," he said. "... I am pessimistic about the economics of being able to remain in practice as a sole practitioner adviser."
"However, there is absolutely no point in moaning - the train is rapidly approaching."
Weatherston also knocked back suggestions that all existing financial advisory bodies, who co-operate currently under the FAANZ arrangement, would merge.
"The majority of constituents have expressed little appetite for [a merger] for that at this time," he said.
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The experience in the UK since their regulations in 2000 has been severe for IFA's.
140,000 IFA's in 2000, 28,000 today. Basically only the wealthy can afford to use an IFA and the balance head for a 'cookie cutter' style financial experience.
Many IFA's flocked to become tied agents as the costs of being an IFA skyrocketed. As in NZ - the FSA is funded by levies on members, as the number of AFA's & QFE's drops levies will rise. (140,000 to 28,000 - that equated to a large jump in levies!)
Then came independent advisors, who are suppose to have a broader product base to help clients' needs better, and they don't have to shop around.
Because the entry barrier is raised and it is becoming expensive to be an independent advisor, are we on the way to reverting back to tied-agencies? Let clients do the shopping and decide for themselves again? Your views guys.
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The landscape ahead will be dominated by the large manufacturer-owned distributors who will be able to sell "any colour as you like as long as its black". This homogeneity will appeal to mum & dad average (and below) and will be differentiated largely by price or feebies. Product performance will continue to be mediocre at best.
At the top end - private banks (and I mean real Private Banks... not those that we currently see here in NZ) will continue to attract HNW clients, along with 2 or 3 specialist financial advisers who have played in this space for some time (word of mouth is big amongst the HNW community).
That leaves a gap for advisers who don't want to be institutionally aligned, and are too small to survive on their own. These folks tend to pitch for the mass affluent. Whilst there are currently 2-3 consortiums that I'm aware of who are appealing to these advisers, many are reluctant / unable to leave behind the institutional life-lines that have kept them afloat for the past decade, or believe that they can survive on their own.
Oh - and before I forget: don't forget about the increasing number of clients who are / will continue to 'go it alone'. Whilst NZ is far from saturation in the intermediated-advice space, the past few years have damaged the industry profile to the extent whereby the available universe of clients is on a rapid decline... but then that's another blog.