Three years ago, I published the Heath Report Two which looked at the availability of financial advice.
It identified that, thanks to the Retail Distribution Review, consumers had suffered the double whammy of a 4,000 drop in adviser numbers and the surviving advisers halving the number of clients they each service from 405 to 194.
As a result, the number of consumers the profession was servicing had dropped from 16m to 6m.
This week (January 15), Libertatem has published its third report. The Heath Report Three monitors the changes since the last report and opens up a new area of research - namely the retirement plans of advisers.
The Heath Report Three had twice the number of survey respondents answering three times the number of questions. The detail is jaw dropping.
The good news is in the past two years the number of advisers has increased 1 per cent, or by 300. The bad news is that the adviser/client number has dropped again from 194 to 160 and, as a result, another one million consumers have lost access to advice.
The new Heath Report goes further than its predecessor. It not only identifies the issues, it comes up with some answers.
The new area of research was the retirement intentions of advisers. We discovered that 1,650 advisers are ready to retire now. We also discovered a similar number will retire every year for the next decade.
To put this in context, last year we lost 900 advisers. Some to retirement, some to other causes.
As higher levels of retirement take hold, we will have 1,650 retirees plus maybe another 500 of pre-retirement age.
Unless these advisers are replaced by new recruits, the number of consumers accessing advice could be under 1m in 10 years.
More importantly the cost of regulation will be split among a much smaller number of clients.
The current fixed cost of regulation is £72 per annum. Fancy explaining to your client that the cost is now £147? You will have to in five years. Or £329 in 2030.
We must start a major effort to recruit and retain advisers. We have called this project “Adviser Train” and it will train administrators, paraplanners and advisers.
If properly constructed, Adviser Train could access over £300m per annum to fund this effort from the government’s apprentice scheme.
I have had a number of meetings with professional bodies and they all have falling numbers, and they don’t have our regulation or its costs.
However, recruitment is not our only issue that needs to change if we are to avoid managing decline and start increasing advice.
Firstly, we need the Treasury and the regulators to get their acts together. The way RDR denied consumers access to advice was wholly predictable.
The Treasury Select Committee identified the issue and Hector Sants told them that “simplified advice” would come to the rescue. It never appeared.