Well, it’s been an historic week, in terms of Interest Rates. The Monetary Policy Committee has reduced them to an all time low of 1%, since the origin of the Bank of England in 1694, with one more push, to kick start the economy, credit & the mortgage market.
The government have now got to put real pressure on the banks, as the base rate reduction seems to be piece meal, and ineffectual without actually enforcing lending targets, reducing bonuses for bank high flyers, & actually getting them lending again. Certainly, previous reductions in Base Rate might have reduced LIBOR, but that’s about it, and has had no real effect on the economy. Maybe now the government owning stakes in most of the banks, they have real teeth to enforce these changes.
More news on the acquisition trail, the successful IFA Consolidator, Jelf Group has stated that revenue was up by 59% from September 2007 to September 2008, from £39.7 million to £63.1 million. The main reason for this, are the acquisitions of 7 solid brand IFAs during the year such as Manson Group, Clarke Roxburgh Group & Argyll Group, despite their share price reducing nearly 73% over the year. The chief exec for the group, Alan Always, said the share price falls have plummeted across the economy, but that they will be reviewing their cost base in the future!
Certainly, the mergers and acquisitions process that builds up speed week by week in both Banking and IFA sectors, will give the FSA an easier job to regulate them. I can see about 20-30 giant IFA firms navigating a fee based Financial Services landscape, with full resources to offer an holistic approach to all clients, not just HNW. The cost of this, I think, a number of compliant, passionate, professional IFAs that have left the industry in the meantime because of RDR,TCF etc.Is this the pangs of a new world order, I don’t think so, it’s a crying shame and a loss to the Industry.
No real surprise with the next snippet of news; Just Retirement sales volumes have reduced by nearly 9% over the six months between June and December 2008. Their annuity sales are also down by 13%, over this period. Mike Fuller, Chief Exec, has put this down to reduced maturity values in pensions & general market conditions, where as their funds under management have fallen due to wider credit spreads on Corporate Bonds.
Let’s look at this simply, house prices have been battered over the last 18 months, there is a lot less equity in houses generally, to give people equity release options. I’m sure there’s still a market out there, as some people have lived in a house for 35 years and don’t even have a mortgage, but certainly this dip for equity release firms like Just Retirement, isn’t a bolt from the blue!
Apparently, the F/S Skills Council has let advisers know that the existing range of F/S Qualifications don’t even guarantee them, that they will meet to new requirement under the Retail Distribution Review. The industry will have to wait until requirements are actually defined. by the FSSC, and that IFAs & advisers should be aware that the exams they are currently sitting may move them closer to diploma level, but whether that is enough for RDR in 2012 is another question.
We are in the pit of the worst recession in History, Capital Adequacy Ratios are crippling some IFAs, funds under management are falling quarter by quarter, the FSSC should quickly resolve this and at least let IFAs know where they stand on the technical side. Granted the Retail Distribution Review is important to the future of the IFA market, but certainly, many IFAs will be nervous about managing their route towards hitting these standards, and should at least know what those standards are.