These people have, traditionally, been served by an army of more than 30,000 advisers who are authorised and regulated by the regulator, formerly the FSA and now the Financial Conduct Authority.
Many of them had successful careers and built up a loyal client base to serve their local communities. However, statistics indicate that, as some had predicted, the numbers have fallen.
The combination of economic woes at home and abroad and the retail distribution review, which came into force on 1 January, have created seismic shifts in the way people pay for financial advice, and in the way that advisers run their businesses.
RDR has changed the industry landscape. You only have to read the national and trade newspapers to see stories of adviser firms selling up as a result of the higher qualifications threshold and downward pressures on profitability resulting from RDR.
When RDR was first mooted back at Gleneagles, the aim was to help bring better quality advice to more people in the UK. Even last year, the then FSA said the reason behind the fledgling Money Advice Service was to help reach the wider population, citing that 70 per cent of the UK had no access to advice at all.
But the fabled Mas has failed to deliver, despite pouring money into its ‘Ask Ma’ campaign, and drastic cuts by banks to advice services has led to the number of advisers employed by banks and building societies to fall by 44.5 per cent from 8658 to 4809 at the start of the year.
It seems more people are left with fewer advisers under RDR, not more. Is this just nay saying for the sake of it? Sadly not. The figures speak for themselves. In 2010 a study by consultancy Ernst & Young estimated that the number of registered individuals would fall from 30,000 to nearer 20,000 by 2015 – a 33 per cent decline.
Many have said this gap is too large and that new blood is needed by the industry. But just a few weeks ago Martin Wheatley, chief executive of the FCA, admitted there had been a 13 per cent drop in the number of retail investment advisers since last summer.
He said 31,132 advisers were qualified as of December 2012 and had received their statement of professional standing as required under RDR rules.
This was a significant drop on the regulator’s RDR readiness survey revealed in February this year when it showed there had been 35,899 retail investment advisers as of late summer 2012 – a fall of 11.5 per cent compared to summer 2011.
The decline is happening and I think we know among which sort of advisers. Last year independent research was commissioned into the reasons why advisers were buying and selling their businesses.
Of the reasons for selling 96 out of 150 said they were going to retire. Of those seeking to sell, 68 per cent were sole traders who no longer felt confident or desired to continue operating in this environment.
If the Ernst & Young prediction was correct there seem few things to stop the current trajectory of depletion. The economic uncertainty prevails, business taxation is high and becoming tighter with VAT rules on service, and the changing business models ushered in by RDR has caused headaches for firms.
