The world of financial advice has undergone several evolutions, and even revolutions, during Money Management’s long history. Each year brought new challenges, often more complicated than the last.
There have been new horizons, suns that have set (and sunset clauses), and plenty of false dawns, too. But as Money Management takes its leave, the industry again appears to be on the threshold of a new era.
It did not look that way at the start of this year: for once, advisers’ biggest challenge appeared to be adapting to the changes of years gone by, such as Mifid II and Prod, rather than facing down new problems. Then, in July, the regulator sprung a surprise, declaring it would ban contingent charging on pension transfers just months after it had backed away from such a decision.
That suggested the winds that have buffeted the advice industry’s journey over the past half decade have not yet died down after all. Perhaps intermediaries are merely in the eye of the storm: to the contingent charging upheaval they can add the Financial Conduct Authority’s forthcoming assessment of the successes, or otherwise, of the 2012 Retail Distribution Review and 2015’s Financial Advice Market Review.
As is perhaps inevitable for a sector undergoing fundamental change, the advice industry has become wearily familiar with the prospect of existential threats looming over the horizon in recent years. They will also recognise structural concerns, such as the relative paucity of new advisers joining the industry.
A survey from Octopus released this summer, for example, found that almost a third of advisers planned to retire in the next five years, with 58 per cent intending to do so within the next 10. In addition, 44 per cent said they were concerned about attracting new advisers to their business.
Once again, there are plenty of challenges ahead for the sector, particularly as advisers, like discretionary fund managers, continue to work through the implications of Mifid II costs and charges disclosures.
“Couple that with the regulator’s competition commitment and I think we will see a reasonable amount of change over the next few years,” says Robin Keyte, winner of this publication’s Financial Planner of the Year Award in 2014.
Despite all this, financial advice remains an industry in relatively rude health. The sector has continued along a path of professionalisation that it began in earnest in the run-up to the RDR, and a 10-year bull market has brought plenty of benefits, too. More recently, pension reforms have provided an additional fillip.
For evidence of this success, look no further than the FCA’s review of advisers’ retail mediation activities returns: total revenues for the sector rose from £3.9bn in 2017 to £4.4bn last year.
In a further rebuke to received wisdom, it is the smallest firms that are doing the best job of holding their ground. Instead of falling as many expected, the number of adviser firms crept higher last year to stand at just over 5,100.