There have been lots of positive stories about the pensions and financial services industry recently, but one area that has attracted negative press is that of introducer businesses. There’s greater demand for pensions advice thanks to new freedoms for example, but are unregulated introducers more of a problem than a help?
According to the FCA, the number of financial advisers in the UK has shrunk from around a quarter of a million in the late 1980s, to less than 26,000 today. This means there’s no shortage of business for those remaining, so is there a need for introducers to bring in more?
Unregulated introducers may have been involved in a number of failures of financial advice firms and that has led to calls for an investigation. A particular worry is that introducers may have an undue level of influence over investment decisions. Clearly, this represents a breach of regulations if introducer firms are in some way offering advice.
Of course, the right software for IFAs, from suppliers such as https://www.intelliflo.com/, can help advisers handle higher numbers of clients. However, tracking down new clients needs a good deal of effort and therefore using an introducer may seem attractive. It’s not good, however, if it harms the reputation of the business.
Fortunately, there are plenty of other sources of new business. Many customers come as referrals from existing clients, and there are many that are referred from accountants or solicitors. Advertising and having a strong online presence also bring in smaller but regular numbers of new clients. Less than 15 percent come from ‘other’ sources, according to Prudential, and that group includes those from introducers.
So is there a need for regulation? Many people within the industry believe that there is. Introduction in itself isn’t a bad thing, and firms doing it well shouldn’t have anything to fear from tighter regulation. The advice process itself is closely regulated, so it seems only logical that introductions should come under a similar regime.
This doesn’t mean a ban on introducers, but applying regulation should serve to drive up standards. It may also mean that advice companies bring the introductions process in house. With regulation would also come things like professional indemnity insurance which would also serve to shine a spotlight on introducers’ conduct.