More and more advisers are turning clients away because it would be uneconomical to service them, research from the Association of Professional Financial Advisers has revealed, as the weight of regulation continues to push advisers’ costs up.
The survey, conducted by NMG Consulting among 238 advisers, found that 61 per cent of advisers have turned clients away during the 12 months to January, up from 54 per cent in 2013.
Of this figure, 57 per cent had turned away potential clients seeking pension advice and 43 per cent had turned away clients seeking Isa advice.
Affordability of advice was identified as the primary reason behind turning potential clients away, with 42 per cent doing so because it would not economical to service them based on their client’s circumstances. This was up from the previous year’s 37 per cent.
Chris Hannant, Apfa director general, argued that while a supply and demand mismatch may explain some of the rise in turn-aways, the figures are still concerning.
“Policy changes are pushing the public to take a greater interest in their finances and encouraging a more hands-on approach.
“This increases the need for financial advice, but the weight of regulation is pushing up costs for advisers and putting professional financial advice out of reach for many who would benefit from it.”
At the end of December, the Financial Conduct Authority published an independent RDR post-implementation review which claimed the intermediary sector may have a surplus of around 5,000 individuals.
Mr Hannant said: “Our figures, in contrast with the conclusions drawn by the FCA in their recent RDR post-implementation review, are pointing to the opening up of an advice gap.
“For an increasing number of potential clients, it seems professional financial advice is not as affordable as it needs to be.”
He added that advisers are doing their part to make their services affordable, and regulators need to do theirs by reducing the burden of regulation. “It’s not about reducing standards; it’s about reducing complexity.”
Meanwhile, a separate survey by F&C Investments, amongst over 250 advisers at a series of retirement roadshows, found that nearly six in every 10 are delaying post-retirement advice to their clients ahead of the April changes.
Some 51 per cent of advisers believed the majority of their clients who would have purchased an annuity on retirement will now defer. For clients considering pension drawdown after April, 90 per cent of advisers predicted the majority of their clients will drawdown in installments.
Rob Thorpe, head of UK sales for retail and wholesale at F&C, added that the anticipated deferral of pension pots means the investment industry needs to continue to innovate and develop investment products that will cater to the needs of retirees.
“We anticipate the pension changes will lead to a growing interest among advisers for multi-asset income solutions as they seek products that aim to deliver a regular income stream whilst allowing them to keep the bulk of their capital invested.”
peter.walker@ft.com
