Fees plus CAR most popular answer to RDR

A model based principally on fees but with some commission business on a customer agreed remuneration basis is seen as the most popular way to address the retail distribution review, but the future market place is predicted to hold many different models, according to Corporate Adviser research.

Exactly half of delegates at the Corporate Adviser Summit said they expect to adopt this business model in the future, given their current understanding of what the RDR will bring. Only 12 per cent of firms represented at the event said they expected their operation to run principally on the basis of general financial advice with commission as the principal form of remuneration.

A further 19 per cent said they would operate exclusively through fees, with a team made up principally of professional financial planners, while an identical proportion said they would split their business into professional, general and primary financial advice segments for different markets.

Nick Burns, group managing director of PIFC Consulting defended provider ownership of intermediaries, saying his firm would remain independent for the foreseeable future.

He said unlike private equity backers who are focused on a quicker return, his firm’s parent, Axa, has been prepared to put in the capital the firm needs to allow it to invest.

Burns said: “Does it affect our independence? Absolutely not, currently. From Axa’s perspective they are taking a long term view to growing this to a £250m business making a 20 per cent margin. That is a good profit but they will want a bit more than that, won’t they. They are interested in wrap and will attempt to drive it through platforms to achieve efficiencies and they will obviously make it attractive to use other areas of their business.

“That is a longer term play. For the moment our independence is still very strong, and until we get to the size that we need to get to and can drive some of those efficiencies, that is how I see it staying.”