The Association of Professional Financial Advisers (Apfa) has urged firms without the capital to start preparing now for the new capital requirements being phased in from the end of 2013.
The new rules indicate that all advisers must hold capital worth at least four weeks of expenditure or GBP15, 000, whichever is higher by the end of 2013, the greater of eight weeks EBR or GBP15, 000 by the end of 2014 and the greater of 13 weeks EBR or GBP20, 000 by the end of 2015.
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APFA research conducted by NMG Consulting reported 88% of advisers are aware of the new rules but only 51% think they are clear.
According to the research findings, 20% of advisers say they do not have GBP20,000, and another 25% were unsure how much they had. Among these, 54% say they are unsure how their firm will meet the requirement to hold GBP15, 000 or four weeks’ EBR by the end of 2013.
The research findings revealed that almost 20% advisers say the firm will need the principal to invest their own resources and 5% say they will require a cash injection from shareholders.
Apfa senior technical adviser, Linda Smith, said: "Advisers are split into haves and have nots when it comes to capital holdings.
"This is particularly alarming when you consider that the requirements for many firms could be a lot higher than GBP20, 000, because of the EBR. For example, a firm has annual outgoings of GBP200,000 by December 2015 they will need to hold GBP50,000 as capital.
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By GlobalData"Advisers are coming through a significant period of change post-RDR, but with the first set of increased capital requirements coming into effect in six months, preparing for it needs to become a priority now," Smith added.
On 8 April 2013, PBI reported APFA adds Openwork has posted its first ever profit reversing the GBP13 million loss it made in 2011.
On 14 Mar 2013, the number of advisers fell by almost 10% between 2011 and 2012 from 26,339 to 23,865, in the run-up to Retail Distribution Review (RDR), reported Apfa.
