More than 20m people will end up without access to professional financial advice because of Retail Distribution Review reforms, adviser champion Garry Heath has warned.
As part of his ongoing Heath Report, which is collating data on changes in the advisory market since the implementation of RDR on 1 January 2013, Mr Heath said early analysis showed that many advisers have already left the industry or are unable to service existing clients, meaning swathes of consumers have been left in advisory limbo.
The worst-hit would be those clients served by “undefined advisers”, those general IFAs who have not become boutique or developed a segregated advice model, but were still servicing transactional clients who were least likely to be able to pay fees.
In a worst-case scenario, the former director-general of the Association of IFAs, the forerunner of the Association of Professional Financial Advisers, predicted that the number of clients using undefined advisers could be “entirely wiped out”.
His interim report said: “RDR is the paradigm shift in financial services distribution. Currently 3.5m clients have lost an adviser who has already left the industry. In addition, another 3m clients are attached to an adviser who no longer has the capacity to service them, totalling 6.5m.
“This may rise to 14.5m when the full effects of RDR becomes clear. The banks have also jettisoned their adviser force, leading to an additional 6m banking clients losing their access to advice.
“So between 12.4m and 20.4m UK consumers have lost, or may lose, their access to financial advice. Most of these clients want advice when they need it rather than regularly.”
The report added that there were 38,750 IFAs active in November 2009, but this figure has now dropped to 31,750.
Andrew Oliver, the director of Kent-based Andrew Oliver & Co, said RDR was one of several factors driving IFAs out of the industry.
He said: “The average age of an IFA is 58. We have got an ageing population who at some point will have to leave the industry because of health issues - either their own or in the family.
“You also get the IFAs who have got through RDR and think they are getting a bit too long in the tooth and a bit fed up with things such as simplified advice and the guidance guarantee.”
The full Heath Report, which will factor in responses from parliamentarians such as members of the Treasury select committee, will be available by the beginning of November.
Right to reply
When asked whether RDR developed an advice gap, an FCA spokesman said: “We have committed to undertake a post-implementation review of the effect of RDR and the possibility of an advice gap is one of the areas on which we will be focusing.”
Adviser projections (January 2016)
|Source: Heath Report|