By 2016 there will be less than 6,000 financial advisers in the UK as the Retail Distribution Review attrition grows, with “strong regional firms” set to flourish at the expense of their national peers, ex-Positive Solutions chief executive Jim Reeve has argued.
Speaking to FTAdviser, Jim Reeve, now managing director of consultancy Signature Private Clients, believes that well-managed advisory firms will have a great 2014 but warns these these winners will be “the elite few”.
He said: “By 2016, there will be less than 6,000 financial advisers in the UK.
“Strong regional firms will flourish. They know their market, they have control over their client advice offering and most importantly they are in business for the right reasons - to build valued long-term client relationships.”
Mr Reeve warned that for networks to be successful, they must “urgently transition” to a fully vertically integrated restricted advice model, adding this is the “only way they will ever generate profit and gain any control over their client offering”.
He also believes banks must re-enter the financial advice arena. Although he does not believe they can compete with well-established advice firms, he believes they have an “outstanding opportunity” to bring a low-risk restricted advice offering to the masses.
According to figures published by the Financial Conduct Authority, adviser numbers rose marginally in 2013 by 5.9 per cent to 32,690 retail investment advisers as at July, having previously dropped 20 per cent in the 12 months leading up to the RDR.
The biggest drop was among bank advisers, with bancassurance arms now accounting for around half of their pre-RDR number at around 4,600.
Mr Reeve added that discretionary fund managers will move towards having “greater direct client relationships” and platforms will experience significantly increased margin pressure.
He said: “Creating valued services and partnering with gold medal firms is critical.”
Mr Reeve also warned insurance companies will continue to be “seriously challenged”.
He said: “They don’t manage funds, don’t manage risks, they don’t control distribution. Will they move to establish their own distribution or see their embedded value erode further?
“The FCA will continue to attract many more directly authorised firms - is this what they want? They could learn from bank reforms and split advisory firms into good firms and bad firms.
“Cleaning up legacy issues, by having firms actively working with clients to manage their way out of losses is more effective than paying redress now.”
