The research is part of AIFA's work to help IFAs meet the demands of RDR and follows the first phase launch of its online business academy (www.aifaffwd.net), which is supported by Skandia.
Carried out among the owners of 140 IFA firms, the research has highlighted uncertainty over the costs facing IFA firms as a result of the RDR consultation paper. When asked the cost per adviser of a successful business transition programme, a fifth of owners could not estimate the financial impact on their firms. The estimates that were given varied dramatically: 9 percent believed there would be no cost to the business compared to 10 percent who believed the costs would be over £10,000 per registered individual.
Despite uncertainty over the costs of meeting the RDR, the IFA profession is responding to the challenge. Almost half of IFA firms are currently investing between one and five hours each week into their transition; 18 percent are investing between six and ten hours and six percent are investing over ten hours. However, the task is not going to be a quick one with over half believing that their firms won't be RDR ready until the end of 2012 and, worryingly, 10 percent saying that transition won't be complete until beyond 2012.
Chris Cummings, Director General of AIFA, said: "I am both concerned and encouraged by the research results. My concerns stem from the financial uncertainty that the RDR is creating in IFA firms, with over a fifth of business owners unable to estimate the cost of transition. This ambiguity comes at a time when the economic climate is extremely challenging for the profession. I would therefore implore IFA firms to fill any void in their understanding of the cost of transition by using tools such as AIFA's online business academy. This will help them to fully understand the scale of the task they face and financially plan accordingly.
"The FSA's cost benefit analysis of the RDR stated the cost to the IFA profession to reach compliance would be £430m. Irrespective of IFA estimates, what is clear is that costs borne by firms will be significant. The additional costs, both monetary and time, required to fulfill the RDR requirements are substantial and should not be underestimated.
"However, I am encouraged because, as a profession, we are stepping up to the challenge presented by the RDR. IFA firms around the UK are rolling up their sleeves and getting on with the task of changing their organisations to ensure they are ready. There also appears to be a realistic sense of how long this process is going to take, with nearly two thirds of firms estimating that the project will take over 18 months to complete transition."
The main launch for the online business academy (www.aifaffwd.net), developed with the support of Skandia, will take place in September 2009. Once complete the academy will provide a Financial Modeling module that will enable IFA firms to gain a realistic understanding of the financial impact transition will have upon their business.
The first phase of AIFA's online business academy went live at the beginning of July. The academy currently allows members to generate a business action plan by answering a number of questions about their businesses. The plan will help IFA firms assess their current status and map the activity needed to become an RDR ready organisation.
