Consolidation is inevitable in the wealth management industry and has started to gather pace in the run-up to next month’s at-retirement reforms, according to Wealth Horizon chief executive Chris Williams.
Speaking at a round table organised by MRM initiative My Financial Services, Mr Williams argued that manufacturers will continue to look to control distribution “with the same disastrous consequences that we have seen before”.
Mr Williams added that new entrants to the market will continue to offer the best opportunity to “shake things up to challenge the old guard” and bring clients genuinely to the heart of propositions.
In February, insurance giant Standard Life announced that it was set to launch a wholly-owned, UK-wide financial advice business, agreeing with Skipton Building Society to buy its Pearson Jones advisory business.
The provider stated that the move - which has been trailed by bankrolling IFA acquisitions - was in response to fundamental changes that are driving unprecedented demand for advice from customers. It also cited a lack of access to affordable advice, the oft-cited advice ‘gap’.
John Cowan, executive chairman at Sesame Bankhall Group, agreed that the industry is going through another round of considerable change.
“We are seeing insurers buying distribution companies, talk of yet more platforms entering the space and consolidators buying up assets. Advice, and the need for it, has never been more acute, despite all the talk of sophisticated investors going down the DIY road.”
Focusing on the impact of the new pension flexibilities for wealth managers, Mr Cowan warned that how to service perceived low value pots of retirement funds remains a considerable challenge for the sector.
“In the rush to secure client funds there is always the danger of opportunists delivering poor quality advice and contaminating the excellent advice community,” he added.
Jon Gwinnett, pensions technical manager at Nucleus, added that firms like his own would face the same challenges as the whole industry – volume, costs, regulatory scrutiny and uncertainty.
“The new options and complexities, particularly around inheritance planning, make the changes both a useful tool and a huge opportunity for advisers.
“The downside risk is the lack of consumer understanding and the risk that regulators and government will seek to shift blame for any policy failures onto the industry.”
Yesterday (24 March), the regulator’s business plan revealed a major focus on how the at-retirement market is operating post-April, with among among areas advised distribution process coming under scrutiny in the coming year.
It came as advisers continued to express concern over potential claims in the future arising out of advice to those taking more risk when accessing their pension under the new freedoms.
Mr Gwinnet added: “I think too, that the timing, with a general election only a month away, is unfortunate – there is little certainty that the rules will not be reassessed in the near future.”
Earlier this month, shadow pensions minister Gregg McClymont, said during a debate with pensions minister Steve Webb that the Labour party would monitor but not unwind the pension freedoms announced at last year’s Budget.