War and peace a year after RDR

I should confess here that I am naturally a bit of an optimist, a glass half full sort of chap. If I were an IFA I could perhaps be forgiven for suffering the January blues after years of turbulence and indigestion from last year’s RDR changes but there are plenty of reasons to be cheerful (apologies to Ian Dury).

The most important factor in my optimistic outlook is stability. It is an often overlooked element but a vital ingredient for businesses to grow. While there may be further RDR-style reforms, particularly to the platform and Sipps sectors, there is unlikely to be another RDR revolution for many years.

As a result of the RDR changes, painful though some were, the IFA sector is the most professional, best qualified and transparent it has been in its near 30-year history. That is a good reason for consumers to consider, perhaps for the first time, using an IFA.

Thanks to the changes the premium placed on professional advice is higher than it has ever been, which means that for highly-qualified and busy IFAs profitability and margins should be rising.

It is true that the advice gap is growing and affordability of advice is a problem but for well-run IFA firms opportunities abound.

The UK economy is also, at last, beginning to gain strength. We are not out of the woods yet and I remain concerned about the UK’s obsession with property wealth but nearly all forecasters are predicting that the UK will see some of the best growth in the EU this year. This too will be an important factor in building consumer confidence.

It has been a long, hard recession and much worse than many forecast but the economic sap is rising. With this in mind, it is often forgotten that IFAs work with clients whose earnings fluctuate from year to year. Many will be directors, professionals and small business owners. When their earnings suffer, IFAs suffer too. With unemployment declining and confidence returning, clients should be in a better mood to invest, fund their retirement plans and other savings. All helpful for IFAs.

Another factor is the UK property market. According to the Association of Foreign Investors in Real Estate, London is seen as one of the best cities in the world to invest in property. That is quite an amazing fact when one considers rapidly growing cities in the Bric nations but when TV reports talk about the London housing price bubble being spurred by foreign investors, the reality is that the UK capital is a good place globally to invest in property.

According to recent reports London house prices have risen by between 7.5 per cent and 9.1 per cent in the past year alone. No wonder foreign investors want a piece of the action.

London house prices have risen by between 7.5 per cent and 9.1 per cent in the past year alone. No wonder foreign investors want a piece of the action

This, of course, makes property in London increasingly unaffordable for many Londoners but those with property in London will be feeling increasingly well off and this will also spur confidence.

It is worth noting that prices outside London have been mostly untouched by this bubble but confidence is returning nationwide and, if the property recovery follows previous UK cycles, it is only a matter of time before the rest of the country follows London.

There are also plenty of new opportunities emerging for IFAs, with auto-enrolment for small firms just one area of potential.

It was no surprise last week that National Employment Savings Trust and unbiased.co.uk announced a joint initiative to hold a round table this month to look at the business approaches to auto-enrolment being taken by advisers. It will include advisers already offering auto-enrolment solutions to clients.

There are plenty of other initiatives in this area including the new financial planner-backed Auto Enrolment Advisory Group designed to help advisers target auto-enrolment opportunities with small firms.

With the Federation of Small Business estimating that there are now 4.9m businesses in the UK employing 24.3m people, and virtually all of them affected by auto-enrolment in the next five years, the potential is immense. I have always felt the small business market is one that many IFAs could capitalise on.

Even the advice gap is being targeted by innovative adviser firms such as Cardiff-based Penguin Wealth Management which is launching a low-cost pension service called www.increaseyourpension.co.uk under the Get Financial Advice brand. Several other planners and advisers are also launching low-cost advice services to help more people access at advice at more affordable rates, a move that is long overdue.

IFAs have been through the wars in the past few years and it is time now to reap the peace dividend.

Kevin O’Donnell is a financial writer and journalist

You said:

Mike Keech in response to Jeff Prestridge’s column on financial advice: “I totally agree with the article and all the comments that follow it. Does anyone at the FCA ever read and take on board what is being said by virtually all the IFAs?”