New rules announced by the Financial Services Authority (FSA) on Friday that prevent IFA’s from accepting commission on regulated investment products (which excludes direct property ownership) could help raise standards in our industry.
From 2012, the result of the catchily-named Retail Distribution Review (RDR) means IFA’s will be forced to charge a fee for their advice on regulated services like investment and pension planning and will have to declare whether they are offering “independent” or “restrictive” advice.
From 2012, the result of the catchily-named Retail Distribution Review (RDR) means IFA’s will be forced to charge a fee for their advice on regulated services like investment and pension planning and will have to declare whether they are offering “independent” or “restrictive” advice.
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More IFA’s to enter the overseas property market
Approximately 35,000 IFAs use a commission-based model and the proposals are expected to cost the IFA industry £430m. As the 2012 deadline approaches, many IFA’s will begin looking at ways to bolster their income streams which “plays into the hands of property people” according to Guy Tolhurst, owner of developer consultancy, Intelligent Partnership. IFA’s, particularly those working with more price sensitive clients, will attempt to charge more competitive fees by increasing their income through commissions in other areas.
Raising Industry standards
There are plenty of good people in our industry but the reputation of overseas property agents has been tarred by the unscrupulous actions of a minority during the boom years when smash-and-grab merchants were looking to make a quick buck.
It won’t happen quickly but there could be a number of postive implications of this directive:
- The playing field will level. Consumers will come to expect more “transparency” and it will become more difficult to shift average product with great commission deals. This should result in less miss-selling and the tabloid horror stories we could all do without.
- With a finite number of overseas property purchases per year, the market share of IFA’s will rise relative to “pure” overseas property agents. This should play into the hands of the best agents who take due diligence seriously as consumers begin to expect more transparency.
On the face of it, this is great news for overseas developers selling to UK buyers as more IFA’s are sure to enter the market. However, IFA’s are not famous for taking risks so it could be make it more difficult for developers in less well-known destinations.
More importantly, it could be the final nail in the coffin for builders selling ill-thought through product in sub-prime locations. And as we all know, there are plenty of those!
Words: Ashley Rigg (globaledge.co.uk)
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