Debating the IFA Business Model - Morningstar,...

Debating the IFA Business Model

× Nigel Whittingham, Joint Managing Director, OBSR, a Morningstar

company

× Rob Stevenson, Kingmakers

×Jasper Berens, Head of UK Retail, JP Morgan Asset Management

×Gary Shaughnessy, Managing Director, UK Retail, Fidelity

Key areas for Debate

×

Independent vs. Restricted Advice

×

Value of advice vs. asset management

×

Passive vs. active asset management

×

Use of risk based solutions and model portfolios

Setting the Scene

Rob Stevenson

Today’s Math Lesson

×

Cheap credit + rocket scientists / inept credit

ratings agencies x world wide banking industry = credit crunch

×

Credit crunch –

any reasonable plan B = world-wide recession

×

Recession + credit rating agencies looking to get back on front foot = global austerity

×

Austerity + commodity price inflation = interest rate hike?

×

Royal wedding + 4 extra days off x USA getting their man x Man Utd

in the final of the Champions League = who can tell why the markets react the way they do.

RDR –

nice idea, but…

×

Where are we right now?

×

Many of the key final rules now published

×

Issues remain (cash rebates etc…)

×

Major challenges thrown up by RDR

×

Scope of advice required for ‘independent’

label

×

Commission ban (and its many consequences)

×

Increased level of qualifications

×

Many others, intended and unintended…

The UK IFA market

×

Circa 7,500 IFA firms, 30,000 RI’s

×

Figure for firms has fluctuated with light M&A activity, consolidators actually aggregating and some post-credit crunch start-ups

×

Strong anecdotal evidence that many advisers expect to obtain qualifications and sort gap fill in time

×

Networks lead the way on ‘introducer’

deals

×

Many IFA firms claim to have a service proposition

×

So, what’s going to happen next then?

Crystal ball gazing

×

Banks will go ‘restricted’

–

but not because they cannot compete with IFAs!×

Traditional product Providers will once again go d2c×

A great many IFA’s

will find it impossible to offer ‘independent’

advice and join most DFM’s

as ‘restricted’

×

IFA’s

(or whatever they are called) will compete with other IFA’s

(and DFMs, Private Banks etc…) for the first time and post-2012, consolidation will happen

×

The notion that a client must pay 250bps per annum on a retail investment will be challenged…

Opportunities for IFAs

×

You own the last mile to the client

×

You can determine the suppliers who will bid to provide the various elements of the proposition

×

You can set the price…

×

But you absolutely must deliver!

Key areas for Debate

Independent vs. Restricted Advice

Key areas for Debate

Value of advice vs. asset management

Key areas for Debate

Passive vs. active asset management

OBSR Ratings Performance UK All Companies Sector

Source: Morningstar Direct. 31/03/2011

January 2002 – March 2011

Past performance is not an indicator of future performance.

OBSR Ratings Performance Global Growth Sector

Source: Morningstar Direct. 31/03/2011

January 2002 – March 2011

OBSR Ratings Performance Europe ex UK Sector

Source: Morningstar Direct. 31/03/2011

January 2002 – March 2011

OBSR Ratings Performance Asia Pacific ex Japan Sector

Source: Morningstar Direct. 31/03/2011

January 2002 – March 2011

OBSR Ratings Performance North America Sector

Source: Morningstar Direct. 31/03/2011

January 2002 – March 2011

Key areas for Debate

Use of risk based solutions and model portfolios