In this way, the industry’s accelerated search for scale could be a sensible response to higher regulatory burdens and a positive development for consumers in the advice gap.
Certainly, the cost of regulatory compliance is making scale and delivering good client outcomes increasingly interlinked.
RDR catalysed that process and the consumer duty accelerates it. Combined with tighter financial conditions and falling asset values, it could trigger a further wave of mergers and acquisitions in the financial planning industry as vulnerable firms are swallowed up opportunistically by the strong.
We are likely to see further horizontal integration of smaller advice firms into networks.
Vertical integrations have also become more prominent, as large advisers and networks explore white-labelling platform services and acting directly as a platform service provider.
Of course, this will radically change the risk profile of adviser firms adding new regulatory and capital requirements.
White-labelling of platform technology and the centralised investment proposition can be a smart solution for medium-to-large, fast-growing adviser firms since it provides access to robust infrastructure and capability at a fraction of the time, cost and risk associated with developing and running their own platform kit and investment products from the ground up.
Jonathan Sandell is group head of propositions at Embark Group
