Around 18 per cent of advisers think the Retail Distribution Review has not had a positive impact on the quality of financial advice, according to Schroders.
The firm’s annual survey, among 575 advisers, showed that 58 per cent of advisers thought the RDR had a positive impact on the overall quality of advice, improving transparency, as well as the professionalism and awareness of adviser value.
Robin Stoakley, managing director of the UK intermediary arm of Schroders, explained that this is the highest approval rating advisers have given the RDR in the history of the survey.
However, many identified increased administration and regulation, rising costs and the growing ‘advice gap’ for those in the low and middle wealth bracket, as some of the least positive impacts of changes.
Dan Farrow, chief executive of Chelmsford-based SBN Wealth Management, said 18 per cent is quite a low number, given that the 82 per cent majority feel that a positive impact has been made.
“The IFA industry has a problem in terms of its interpretation of exactly what the regulator wants, as the FCA are not explicit in many areas as to how they want the firms to operate.
“Therefore, many firms build up administratively heavy processes and procedures, adopting out-of-date working practices and not fully utilising technology, so squeezing margins.”
Mr Farrow said that one consequence of becoming more professional was rising cost and a widening advice gap.
“Unfortunately there isn’t the equivalent of the legal aid system in the financial services industry and as costs and charges become more transparent consumers will have to make a choice, to either go it alone or obtain advice and increase their chances of a successful outcome.”
Simon Torry, chartered financial planner, at Basildon-based SRC Wealth Management said RDR has had a positive impact on the quality of financial advice.
“If nothing else, the higher qualification requirements, which were long overdue, have seen to that,” he said.
Pointing to the advice gap, Mr Torry said RDR may have just accelerated a problem that was already starting to surface.
“Increased regulation and the cost of delivering advice is the problem, and these were already an issue prior to January 2013,” he said. “The regulator needs to review the rule book and simplify the advice process for this with basic needs.
“We as a business simply cannot afford to offer our services to anyone with less that £100,000 of investable assets, and this looks set to increase to a figure approaching £250,000 in the not too distant future.”
Mr Torry said he is uncertain whether RDR has achieved its objectives regarding the fee and commission disclosure.
“If the regulator really wanted to shake things up they should consider banning percentage based charging and not just for financial advisers.
“On balance I consider that RDR has been a partial success, but as is often said ‘the road to hell is paved with good intentions’.”
According to the poll, more advisers are outsourcing their portfolio management in order to concentrate on providing holistic financial advisory services to clients.
Just over half of advisers who already outsource are increasing the proportion of assets to hand off, with 88 per cent saying they will continue to outsource portfolio management next year.
Mr Stoakley said he was pleased to see the continued trend for advisers passing client assets to professional managers such as wealth management firms. “In these uncertain times for markets, client portfolios need all the help they can get.”
As for the assets themselves, the survey found that growth of passive investments is starting to stabilise, with two thirds of advisers using passives for client portfolios and one fifth planning to increase their use of passives in the next year.
Looking ahead to asset allocation choice for 2016, the fund house found developed market equities were the most popular choice among advisers, with 9 per cent saying they would expect to recommend funds in the IA UK Equity Income sector to clients next year.
A further 9 per cent said they would recommend funds in the IA UK All Companies sector.
katherine.denham@ft.com
