Alan Lakey is a 36-year veteran of financial services and has seen a lot of change, including two regulatory overhauls of the advice sector and, most recently, adviser numbers falling and his own proposition moving away from independent due to the Retail Distribution Review.
Away from the troubles of the advice profession, in his chosen sector specialism of protection he has witnessed the savings gap spiral to an estimated £2,300bn and concern over the lack of protection taken out in the UK grow.
However, for Mr Lakey, partner at Highclere Financial Services, the travails of advisers and the paucity of saving in the UK are symbiotic, with the latter being fuelled by a near 99 per cent drop in the protection advice market.
Mr Lakey says he would be “surprised” if there were more than 3,000 specialist protection advisers in the UK, adding he may well be “overestimating”. In contrast, he says 30 years ago virtually all of the 250,000-strong advice market sold protection.
He puts part of this down to the general drop in adviser numbers as well as general shift towards ‘wealth management’.
Recent FCA figures show there are 32,690 individuals authorised to give investment advice - down 15 per cent in two years - 21,881 of which work at advice firms. Advisers that do protection but no investments or protection are not required to be authorised under the RDR rules; there are no figures on the number of such intermediaries in the market.
“Over 20 to 30 years we have found the number of advisers has shrunk by 90 per cent, so now we have 21,800 financial advisers and many of them are wealth managers and their primary function, as they see it, is to deal with investments and maybe some pensions. I talk to a lot of wealth managers and they don’t deal with protection as it doesn’t fit into their model.
“It [protection] was the main area: to make sure you are insured. Pensions weren’t a big deal until later and critical illness insurance didn’t even exist then.”
Mr Lakey added there are three kinds of protection advisers in the market: those that don’t do any protection at all, those that do loads “like me”, and those that “dabble” in the market.
“Now it’s only the person like me who probably focuses on looking for new protection business. Some won’t look for it at all and the guy that does a bit of this and that is probably aiming to do investments and pensions and will do protection if arranging a mortgage or if someone asks for it.
“As a consequence protection sales are massively down – each year there’s a £2.3trn gap and it’s going to get wider - of course it will as there are less people in this and it’s what people need but don’t want as you are buying something intangible.”
Mr Lakey set up a website, CI Expert, two years ago to empower advisers to do a “true head to head comparison” of critical illness policies.