The head of asset management for London-based investment manager ACPI said the increase in non-advised investors had been a symptom of the RDR, as clients were pushed away from the advisory community.
However, he added that more people would need advice during the next decade as the global economy experiences more turbulence.
He said: “As far as the financial system in the West is concerned, we have no more bullets. Liquidity in the bond and equity markets has collapsed, and the stock market has no god-given right to perform just because the US Federal Reserve prints money.
“We believe there will eventually be a huge rebalancing. Governments in the West have found new and more innovative ways of kicking the can, but each time it is happens, the consequences become much worse.”
With this scenario in mind, Mr O’Hanlon said ACPI concentrated on emerging market investing, with a particular focus on India, as it delivered “stable growth”.
He added: “The RDR did some good things, but pushing people away from advice and into passive investments, such as exchange-traded funds, was not one of them.
“It has driven the cost of investing down, but low costs do not necessarily give clients the best returns, and if markets do encounter trouble, as we think they eventually will, the failings of passive investing will be more prevalent, with the lack of an advice channel leaving investors exposed.”
Adviser View
Simon Webster, managing director of Kent-based Facts and Figures Chartered Financial Planners, said: “The argument in favour of passive is strong in heavily researched markets such as the UK, and active managers also struggle to outperform the markets. Markets move in cycles, however, so the key is to have a diversified portfolio, hold it for the long term and stop trying to be clever.”
