Even before RDR came along, the future of the IFA industry in the UK – where the average age of advisers is said to be 55 – had been looking less than robust.
But now, thanks to RDR, many are expected to leave it: not just because it will become more difficult to make a profit/living, but because of the burden that the onerous new regulations will impose upon them.
Coupled with the requirement for additional professional qualifications, both initial and ongoing, the RDR initiative is increasingly being viewed as an over-bearing measure that ultimately will preclude IFAs from having the time for the job they were trained for, and exist, to do: advising clients.
Meanwhile, with a lack of incentives for young professionals to choose a career as an IFA, and a corresponding shortage of new talent coming through, it is clear that the industry’s dynamic is clearly about to change significantly. Precisely how, though, still remains unclear.
Here lies the rub. While the FSA, with the best of intentions, is seeking to protect consumers, in actuality RDR is likely to put financial advice further out of their reach.
This is taking place even though most Britons, like citizens in so many other developed countries, are widely acknowledged to have insufficient pensions, life insurance and/or critical illness cover.
As a result, RDR is likely to simply widen the financial planning gap further; and – when coupled with the burden of growing populations increasingly weighing on governments – to form a vicious circle of less and less financial protection for more and more people going forward.
The outlook offshore is no better. The consensus is that over time, most regulators will emulate the FSA’s approach – with similar results, impacting both consumers and providers.
Too many studies have shown that few retail clients – including the mass affluent – are willing to pay for financial advice, which will mean that the IFA industry will increasingly focus on the relatively small HNWI sector, where the service is valued.
The result will be tough times ahead, as businesses adapt to the new financial landscape.
My fear is that the consumer will be biggest loser in all of this.
What is more, I believe this intense scrutiny of advisers is misplaced. It is the banks that have put the world in its currently-precarious economic situation – not us in the advisory industry – that, I believe, should be the main focus of regulators’ attention.
