The RDR. Every sector has its legislative pantomime villain, and this is ours.
In a past life I wrote about private equity at a time when the Alternative Investment Fund Managers Directive was still being debated, with many in that sector predicting similarly ruinous consequences unless the scope of the legislation was narrowed or it was scrapped altogether.
It was not substantially re-written, nor was it scrapped. It came into force across Europe last month and managers have one year to comply with the detail of the legislation, which includes new rules on transparency and passporting requirements that many feel could preclude investment from outside Europe.
Despite these concerns, I will stick my neck out and predict that for better or worse we will still have a private equity sector once this period is up - and for many years thereafter. It would appear that such a benign fate has befallen the advice sector in the months following the introduction of the RDR.
Or at least that is what the Financial Conduct Authority would have us think. Numbers published last week revealed that the number of individuals qualified to give advice under the new rules rose by around 6 per cent between January and July 2013. In the preceding year, they had fallen around 20 per cent.
I’ve made my own feelings on this perfectly clear in the past. Whatever the travails and tribulations endured as a result of the new rules - some of them regrettable, others simply inevitable - they do not undermine the argument for financial advice, which gets stronger by the year.
We all knew some would leave the industry, but I always thought the predictions of a steady outflow that would emaciate the sector in the months and years following implementation to be unnecessarily negative. These numbers, to me, confirm that the predicted attrition has not come to pass.
Coupled with widespread reports of adviser profitability growth in recent months, I would further argue that the debate over whether financial advice is a viable business in the brave new world is now over and that the optimists have won.
Judging by the comments left on stories - and other commentary in the market - many do not share my view. They suggest the numbers are indicative of little more than spin from the regulator to cover up the mess RDR has created. They explain the growth as simply an aberration in the downward trend of the past two years created by stragglers getting their qualification late.
I’m interested in gathering a general view, a ‘web 2.0’ show of hands if you will. Are these numbers worth celebrating or denigrating? Do they reveal the strength of the sector, or are they a red herring thrown by a retreating regulator?
Let me know below, or by emailing ashley.wassall@ft.com.
