OpinionJan 13 2014

RDR paradox could mean more advisers reaching fewer clients

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One year into to the RDR and the rumours of the death of the IFA have, yet again, proved premature. That is hardly a surprise.

More surprising perhaps was the increase in numbers of regulated advisers, perhaps by around five per cent, according to the FCA’s first take in the summer.

The total is 21,684, up from 20,453, and follows an APFA survey from mid-year 2013 that showed an increase of 3 per cent in firm numbers since 2011.

There have been some suggestions that the increase in authorised numbers include many support and compliance functions.

But it does suggest there has not been a precipitous fall. This will be used to justify and defend the RDR reforms. A huge fall in IFA numbers has not occurred.

That isn’t to say that the FSA, as was, had any idea whatsoever what would happen, but it is at least one reason to be cheerful this New Year.

Yet from an economic and social point of view, we surely need to ask: does this 21,684 translate into reaching 5 per cent more clients?

It may be that those advisers, now better qualified and offering segmented services, are serving fewer clients better. This is excellent news for what may be somewhat less harassed advisers with more valuable client relationships. It is also great news for those clients.

It also potentially means we could be seeing more advisers and yet a bigger advice gap.

It may be that those advisers, now better qualified and offering segmented services, are serving fewer clients better John Lappin

Now the concept of this gap may getting a little tarnished in some people’s eyes. From the regulator’s bunker, they may view it simply as a lobbying tool that was designed to stymie the RDR.

But wherever you stand or stood in that particular RDR argument, it is of very limited relevance now. It is surely more appropriate to ask: why go to the effort of reforming advice if its reach is limited to upper-middle-class Britain?

There are a host of other somewhat less fundamental questions. Does it have be full independent regulated advice? Will restricted advice prove to be better able to reach down the income scale? Will the myriad services currently offering advice, help and guidance including MAS help consumers meet at least some financial challenges? Do we need to find a way of finally creating a new and simplified advice category?

Do we dare allow the banks a role in reaching the mass market, or will technology provide the answer instead?

To my mind, the answer ought to be that financial advice should extend as far as possible and cover as many people who need it or want it and policymakers should enable this as far as possible compliantly and profitably.

Indeed, one arguably under-appreciated implication of the recent policy shift from MAS which wants to work with IFAs to close the ‘gap’ is that it requires an advice infrastructure to be there to cope.

And this provides us with the final message – that the regulator should be doing all that is in its power to preserve the existing infrastructure of advisers.

John Lappin blogs on industry issues at www.themoneydebate.co.uk