In July, the Gibraltar Financial Services Commission gave Blacktower the go-ahead for a Restricted Category 3 MiFID Licence. Westwood says MiFID II is likely to be the biggest game changer for his business, largely because of the variety of changes it can install, with its scope ranging from company remuneration structures to how clients are identified.
But one of the biggest issues arising from the directive is whether advisers will be able to remain independent, he says. Lessons can also be learnt from the overhaul of Blacktower’s British IFA business, which has come through the Retail Distribution Review (RDR) and made it to the other side intact.
“I won’t pretend it was easy,” says Westwood. “There was a lot of work and an enormous amount of cost involved to change from the pre-RDR business model to an RDR model.
“The cost implications were underestimated by everybody,” he adds.
Left behind
While Blacktower now successfully operates an RDR business model, Westwood says this new model has restricted the type of client the UK business can serve.
“This model is totally focused on mainstream clients who are able to afford and are prepared to pay fees,” he says.
“So as a business we have reluctantly left behind many clients who should be looked after but can’t afford to pay our fees. That is an industry problem and a regulatory one that they have yet to get to grips with.”
Westwood also welcomes the launch of the Financial Advice Market Review in the UK. He says: “The UK advice industry needs to be given some clear guidelines to run on, because at the moment the FCA’s message is very confused.”
Fee agent
Lessons can certainly be learnt from the RDR switch-up and if Europe moves away from commission-based business models, as Westwood suspects it will, it looks unlikely it will be a problem for Blacktower.
“We are also looking at fee-based structures in the international market by offering a choice to our clients,” he says. “That choice option I think will only grow.”
Westwood points out, however, that the European business model, which relies heavily on bank distribution and bancassurance, is still highly weighted towards a commission-based model.
“If Europe does ban commission it needs to be very carefully thought out because the European business model is not yet geared up for non-commission paying advisory structures. If they try to rush something through then potentially it could be a disaster.”
