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Can an independent financial advisor enter into an IVA?

Many independent financial advisors (IFAs) have suffered greatly in recent years at the hands of the unfavourable economic environment. As a result, a question we are often asked at the IVA Advice Forum concerns whether or not an IFA is free to commence an Individual Voluntary Arrangement (IVA) and continue to practice as an IFA. In this article we will discuss some important points an IFA should consider before entering into an IVA.

Independent financial advisors are not immune to the power of ‘income-shock’. Most of us adapt to lifestyles based upon expectations of the amount we will earn. While certain expenses can be cut back if necessary, many of us have more permanent commitments that cannot easily be scaled back if an extended income-shock is experienced. The slack, at least in the short to medium term, is often taken up by the use of credit. Should an IFA manage to rebuild their income, the temporary use of credit will likely have been required along the way. Any period of time when credit is required to make ends meet greatly increases the risk of serious debt problems further down the line. This can create serious debt problems for an IFA, with an IVA one of the debt solutions well worth consideration.

If you are employed as a financial advisor you should check your employment contract to see where you stand should you need to enter into an IVA. As your firm will be regulated by the Financial Services Authority (FSA), or part of a network that is, they may have a duty to report to the FSA if one of their advisors is insolvent. For this reason some employers add clauses relating to IVAs and insolvency to their employment contracts. A clause in your contract does not necessarily mean an IVA leads to job-loss. It may be that the firm can show adequate supervision of activities is in place and as a result employment can continue.

Financial advisors and independent financial advisors may be members of professional bodies with a predetermined code of conduct. You may wish to consult your specific code of conduct to determine whether or not the commencement of an IVA will have any ramifications for you.

Self- employed independent financial advisors may be regulated directly by the Financial Services Authority (FSA). If this is the case, and you intend to commence an IVA, it’s likely you will need to seek clearance and guidance from the FSA before an IVA goes ahead.

Being a financial advisor or independent financial advisor does not, in itself, prevent you from having an IVA. Many IFAs have used an IVA as a solution to their debts and have successfully continued to work. However, an IFA will need to take steps before commencing an IVA to ensure they fully understand how, if at all, their employment may be affected.

In some cases an IFA may decide they aren’t prepared to sign up to an IVA. In this instance a debt management plan may be a good informal alternative.

A good debt or IVA advisor will be able to help you through this process. In particular, IVA providers themselves will have worked with other IFA clients, ensuring senior employees will be able to provide guidance based on real experience. For this reason it is important to contact an IVA provider with suitably senior members of staff rather than a larger call centre based IVA company where you are likely to be dealing with junior members of staff.

If you are an IFA facing an uncontrollable amount of debt, contact the IVA Advice Forum today. Call 0800 043 7206 or contribute anonymously to our forum for the expert assistance of professionally qualified IVA specialists.

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