The delayed impact of the Retail Distribution Review could see one in five financial advisers leave the industry through planned retirement in the next five years, according to an industry report.
The Heath Report Three, published today (January 15), pointed to data from the Financial Conduct Authority showing 5,898 advisers left the sector following the introduction of the Retail Distribution Review in 2013.
The latest Heath report surveyed 249 adviser firms representing 865 advisers on the current availability and future of professional advice in the UK and identified a five-year window following the introduction of RDR which had seen adviser numbers remain "static."
But the report warned this "Indian Summer" was now coming to an end and 7,000 advisers could exit the industry in the next half a decade.
The 50-page report, produced by director general of trade body Libertatum Garry Heath, stated: "We have now completed the five-year window after the "cull" created by the introduction of RDR.
"It is therefore likely that, having completed this period, advisers might start to leave in greater numbers."
The report found 5 per cent of advisers, a total of 1,650, have immediate plans to retire and another 16 per cent, a total of 5,280 advisers, hope to retire in the next five years.
The survey recorded the average age of an adviser was in their mid-50s.
Only 18,000 advisers are expected to still be working in 10 years time, according to Mr Heath's report, which used the results of the surveyed sample of advisers and extrapolated it across the entire industry.
The survey addressed the exit strategies of those advisers looking to retire and 42 per cent of firms are seeking to grow and transfer internally to a new management team upon the retirement of its principal.
Of the firm's surveyed by Mr Heath at the end of 2017, 45 per cent planned to continue as normal and sell the business when the owner retired and 4 per cent intend to seek a merger with another firm.
Another 7 per cent of firms had no exit plans in place.
Mr Heath added: "Unless these advisers are replaced by new recruits, the number of consumers accessing advice could be under one million in 10 years.
"More importantly the cost of regulation will be split amongst a much smaller number of clients. The current fixed cost of regulation is £72 a year.
"Do you fancy explaining to your client that the cost is now £147? You may have to in five years."
Keith Richards, chief executive of the Personal Finance Society, said while some advisers may have indicate they wish to exit the sector, they may not follow through with actions.
He said: "The rising cost of regulation, a hardening professional indemnity insurance market and the general feeling that the FCA might be slipping back into more draconian policing methods could be reducing optimism in the sector – and have influenced the survey results.
"Increasingly, those who are genuinely considering retirement do seem to be putting in place succession planning, meaning that the population is unlikely to see significant changes in either direction."