In an interview with FTAdviser, Karl Hartey, managing director of Applewood Wealth Management, says advisers are facing a problem similar to the plight travel agents confronted more than a decade ago.
He said: “We would stand in a queue, they would give us the options and we would buy a holiday. What was going on in the back-end was a lot of consolidation. You were getting a lot of mergers of their operators coming together.
“And then there was less choice of holidays and destinations; that’s when we saw commissions being reduced by about half.”
According to Mr Hartey, the reduction in commissions was closely followed by two more blows to shop-front travel agencies: the internet and low-cost airlines such as Ryanair. He said similar trends can now be observed in financial services - and especially in financial advice.
Mr Hartey therefore said that a similar fate awaits financial services that befell these business: numbers will reduce - to some extent this has already been observed with high street banks pulling out of the market - and those that remain will have to specialise and serve niche markets to survive, or focus on higher-end clients.
Earlier this week (9 October) Mr Hartey called for advisers to separate the FSCS levy from their fees when presenting costs to clients in an effort to ensure that costs appear as competitive as possible.
According to Mr Hartey, this “unbundling” of prices would also align with the spirit of the Retail Distribution Review, which emphasises transparency of costs.
The full interview, part of FTAdviser’s ongoing series on advisers’ RDR readiness, will be published online later today (12 October).