How will IFAs react? There is already a significant drift to passive funds, which effectively eliminates the problem for those with this strategy. For those that recommend active funds, there is usually an alternative fund option. Thus, if fund A offers a big competitor a discount that is not available to you, you might choose to recommend the similar fund B.
As such, I do not expect high-quality financial planners to suffer in any way, certainly not in the short term. The same might not be the case for smaller, less sophisticated firms. If they are outgunned on both resources and price, their future must be in doubt. As I have said many times before, I do not see how small, inefficient firms’ resources and without succession plans can survive long in the RDR world.
Finally, there is, of course, the unknown unknown. On 20 April, an FT article carried the headline, ‘Fund managers fret as Facebook pushes into financial services.’
Margins in asset management are fat. There are too many fund groups and too many funds; there are few entry barriers to new players. This is a description of an industry ripe for revolution. Should one of the huge technology businesses choose to play, they would terrify today’s market. Lots of cash; no legacy; huge data resource and a love of customers. Too good to be true? I do not think so.
FCA chief executive Martin Wheatley recently suggested that advice can be fully automated, has the time come for a technology giant to have a look? We will just have to wait and see. The future will certainly be both challenging and exciting.
Clive Waller is managing director of CWC Research
