The problems facing the adviser market are manifold. I am sure you are already familiar with them all.
Primary among the slings and arrows of outrageous fortune currently besetting the market is the issue of dwindling adviser numbers. The old guard of formerly commission-based advisers are slowly retiring or dying off; those that remain are having to take on a heavier proportion of the sector’s already exorbitant but burgeoning regulatory cost; and this burden is largely responsible for putting potential young blood off joining the industry. It is a vicious circle.
Against this backdrop Garry Heath has written to all the members of his fledgling trade body, Libertatem, urging them to use their response to the Financial Advice Market Review (FAMR) consultation process to lobby for his proposed solution – a separate regulator to deal solely with advisers, provisionally dubbed the Professional Advisers’ Regulator (Par).
This is an admirable idea and indicative of the type of positive action for which Mr Heath seems determined to use Libertatem.
It is undeniable that the cost of regulation has spiralled for the average adviser and it is refreshing to find one that has come up with a practical alternative solution rather than simply whingeing.
Libertatem is new, but is already making waves. It does not disclose member numbers but Mr Heath believes it to already be the biggest UK body representing advisers.
He concedes that the details of Par and how it would work still need to be thrashed out. The only goal at the moment is to get the proposal into next year’s Budget speech; the nuts and bolts can be worked out later.
He is not even sure of what the impact would be on advisers’ regulatory costs, but, he argues, it has to be somewhere south of the £75m that advisers collectively currently pay each year.
Whatever the details, this demonstrable keenness to wade into the debate – and drag other advisers with him – should ensure Mr Heath gets a say if and when those details are decided.
This is a good idea and it is great that Libertatem is prompting and driving debate, lobbying on behalf of a sector that has been arguably underserved by its existing trade bodies.
But while I applaud someone finally sticking up for your interests, I can’t help thinking the proposal will only solve advisers’ problem, rather than advice’s.
It would reduce the costs faced by IFAs and possibly free up some time spent on admin, but it would not tackle the shortage of advisers that we currently see.
The Treasury wants more people to get advice – a desire shared by Mr Heath and, I would have thought, most advisers. It is a logical step that more advice will, in turn, need more advisers, not the dwindling numbers we see today.
I have heard it argued that the most effective way to save pandas from extinction would be to find a way to make burgers out of them.
If there were an easy way to generate an ongoing revenue stream from pandas, beyond charging for one-off trips to the zoo, someone would soon find a way to make the bloody things breed.
And so it is with advisers. If we want to ensure their proliferation, we need to find a way to prove their inherent value, show people that advice can provide a tangible benefit that people will appreciate and pay for.
The surest way to enhance the reputation of advisers, increase business and make it a more attractive option for young professionals in search of a career, is to ensure it is seen as valuable.
While anything that reduces the regulatory cost would help existing advisers do the business they currently do more cost-effectively, it won’t bring advice to the wider audience it needs.
I believe the RDR has improved the professionalism of the industry, but it has also cut off a lot of individuals from receiving any advice at all, so that improved service counts for little when it comes to the masses.
To put it more philosophically, if a financial adviser delivers a good financial plan in a forest, but nobody is there to take it, is it still good advice?
What we need to do is get these people in front of an adviser so they can see first-hand the value an adviser can provide.
Retirement is an ideal opportunity to do this and as such it would be more beneficial to advisers if George Osborne used next year’s Budget to undo his backtracking on the diminishing guidance guarantee, and impose a 15-minute chat with a proper adviser on all retirees at the point of retirement.
Of course, in an ideal world, he might announce both, but an improved reputation for advisers – which the man in the street had practical experience of – would be the biggest step to improving advice, making it a more attractive career option and increasing the numbers of advisers and consequently the number of people benefiting from their advice.
That could be achieved whoever was responsible for regulating it.
