AIFA tells firms not to rule out passporting to avoid RDR
The UK’s Association of Independent Financial Advisers has told IFAs not to rule out the option of moving to another EU state and passporting their business back into the UK as the retail distribution review approaches.
In its report, Advice Horizons, which aims to give IFAs practical advice about the various strategic decisions to be taken in response to the impending RDR, the association highlights the risks and costs involved in taking this course of action but says this is a matter “which should not be ignored.”
The report states: “The costs of setting up in a different country, managing the “domestic” legislative and regulatory demands, and also of supervising staff based in the UK can be demanding.
“It is not the easy option it may be portrayed as but, as firms out-source many of their activities, it is a matter that should not be ignored – especially given the tax plans of the UK Government.”
If an adviser were to move outside the UK it would fall beyond the complaints regime of the Financial Ombudsman Service and not have to pay Financial Services Compensation Scheme levies. Firms would also fall outside of the RDR. AIFA said this may be attractive to firms focused on the bottom line and for these firms it may sound like an easy decision but added this would be to overlook some of the complexities of doing so.
AIFA said the complexities and the costs of setting up in another country, where the regulator is likely to be less experienced at dealing with IFA firms, and the possible competitive disadvantages of firms whose clients fall outside the protections offered by the FOS and FSCS should not be overlooked.
Robert Sinclair, director of AIFA, said the association had decided to put together the report, with Legal & General, to urge firms to consider what services they offer in a changing landscape and determine a successful strategy leading up to and beyond the RDR.
“Given the challenges faced by the profession, waiting to see what happens is not an option for firms wishing to thrive post 2012,” said Sinclair.