Prepare for countdown
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Regulatory deadlines are looming. Are the professions ready to meet them?
The Institute of Chartered Accountants in England & Wales has played down suggestions that its membership has been slow off the mark in seeking authorisation to conduct financial services in time for the 1 July deadline.
Product providers have expressed concerns that fewer accountants than expected have applied to meet new regulatory requirements to conduct investment business in-house.
They fear that any squeeze on the numbers of accountants directly handling financial services may be mirrored by a similar decline in the number of law firms conducting financial services in-house when the Law Society's new regulatory regime begins in November.
But Raymond Fear, director of practice regulation at the ICA, says the level of applications across the major categories of authorisation has been in line with expectations.
Around 2,500 accountancy firms have applied for category B authorisation, which allows general advice to be given and business to be introduced to third party financial advisers. In the C and D categories, which cover life and pensions, collective investment and portfolio management, between 700 and 800 firms have applied to conduct financial service business. These require accountancy firms to employ a qualified "competent individual" to oversee financial services.
But there is concern that the new regulatory regime, negotiated between the ICA and the Securities and Investment Board, has put the squeeze on the number of firms which will remain active in the market.
Industry sources suggest that around 1,500 accountancy firms have been active in financial services, with a similar figure involved in transacting business to third party IFAs.
Karl Snowden, head of Allied Dunbar's professional business division, says he believes that many accountancy firms have been caught on the hop by the deadline. They will now be faced by a stark choice between seeking crash-course qualification for staff, buying in outside expertise, or introducing clients to outside IFAs. Either way short-term business and fee income will be lost.
"I would say the deadline date has caught some people by surprise, and I believe it will impact on the production of business in that market place for some months," says Snowden. "We hope that it doesn't have a long-term impact on the increasing benefit that financial service business offers professional practices in terms of fees and client service to practices."
But Ian Muirhead of Solicitors for Independent Financial Advice is not put off by the low volume of accountants emerging to deal directly in discrete investment business. "The reasons for any decline in the numbers of accountants is that people who have not been doing financial services seriously are being flushed out," he says.
"Only technically competent people should be doing this business.
"What's happening is that the absolute number of law firms doing discrete investment business may be reduced from around 900 firms to the 700 mark. But the quality of business and personnel taking on that business has improved," says Muirhead.
Mick Kavanagh is a freelance journalist.