"I would like to line up all the clever people in the U.S. who caused all of our problems and shoot them," says Mark Dampier, head of research at Hargreaves Lansdown, Britain's leading mutual fund broker. Dampier's sentiment is widely shared. The credit crunch in the United States is usually blamed for the sudden and severe economic contraction in the United Kingdom, lamented as the worst economic crisis to face Britain in 60 years.

But this hostility does not extend to the U.S. financial planning industry: "I think of you guys as ahead of us by 20 years," Dampier says.

Ripe Market

This head start may bode well for American planners interested in extending their reach across the Atlantic. Despite the global financial crisis that hit in September and October, the U.K. market may be nonetheless ripe for the entrance of American financial planning firms.

Experts say the American financial services industry has many advantages in the U.K.
"The U.K. industry is quite extensive, but it is also unsophisticated. Plus, the quality of the advice is often low," says Richard Northedge, a well-known British commentator. The U.K. market potential for Americans is huge. By some measures, Britain has the fourth highest GDP in the world.

Moreover, wide disparities in wealth among citizens mean there is an abundance of high-net-worth individuals. Approximately 6% of households have enough assets to eventually be subject to inheritance tax, currently levied on estates of £285,000 ($500,000) or greater.

According to John Barras, deputy chief executive officer of the Association of Private Clients & Investment Managers & Stockbrokers (APCIMS), a trade group based in London, "The U.K. market for wealth management is sizable." The client base, he says, is "interesting."

One of the main things driving american firms into the U.K., ironically, is the regulatory environment, a factor U.S. planning firms tend to complain about at home. The British market, which already resembles that of the U.S., is undergoing a regulatory evolution.

And lastly, fee-based planning, though still far from the norm, is finally starting to make headway among consumers, giving american firms with experience in this area a leg up.

Opportunity Aplenty

"The opportunities for u.s. firms are considerable, particularly given the proposed regulatory changes," barras says. "their issue is to understand the local situation."

American planning firms tempted to expand into the U.K. need to be aware of some British investing basics, starting with terminology. Both countries use the same labels, but they mean different things, starting with the monikers for British practitioners. Essentially there are three types of planners in the U.K.:

• Independent financial advisors. Despite their label, these individuals' primary undertaking is selling products—not giving advice.

   

  In the U.K., almost all financial products, including car insurance, are sold through intermediaries rather than directly from the source. "Financial advisors" rarely play a wealth manager role and are paid almost exclusively via commissions.
  

• Financial planners. They are the equivalent of registered investment advisors (RIAs) in the U.S., and developed only relatively recently in the U.K.

   

  Today, there are approximately 20,100 "planners" in the U.K., only a few of whom are American-style certified financial planners (CFPs). Their focus is primarily on investments or wealth management rather than holistic advice. Many—but not all—are fee-based, though some are paid through commissions.
  

• Private client investment managers and stockbrokers. Advisors using these terms are at the upper-end of the wealth management spectrum. They include advisors at private banks as well as brokerage houses, and commonly hold clients' money in discretionary or managed accounts. Compensation is primarily fee-based.

Despite the difference in vocabulary, though, the U.S. and U.K. industries enjoy more commonalities than differences, argues Barras. The central similarity is the key roles of independents. What's more, planners, advisors and private client investment managers "are compressing," says Nick Cann, CEO of the Institute of Financial Planning in Bristol, England.

More Clarity

Ultimately, Cann says, there will be a clearer segmentation between those providing financial planning and those providing transactional services in the U.K. This could lead to a change in compensation structures. A common practice today is to offer clients the option of setting up either a fee- or commission-based account. When given the choice, most of these clients choose commissions.